Financial Power

How Life Works?

When you’re young, you may have young children to support, a new mortgage payment, and many other obligations. Yet you haven’t had the time to accumulate much money. This is the time when the death of a breadwinner could be devastating and when you need coverage the most.

When you’re older, you usually have fewer dependents and fewer financial responsibilities. Children have grown, the mortgage is paid or reduced, and many routine payments have disappeared. As a retiree, you no longer need to protect your income for future obligations. Plus, you’ve had years to accumulate wealth through savings and investments. At this point, your need for insurance has reduced dramatically, and you have cash to see you through your retirement years.

How Term Insurance Fits

“Most personal finance experts recommend term insurance rather than whole life insurance” – Financial Post, April 2002

Here’s why term insurance most often fits the typical family’s financial life cycle:

When you’re young, you buy low-cost death protection, term insurance, enough to protect the loss of your earning power, and to put the maximum amount you can afford into a promising investment program. By its design, term lets young families buy more coverage for their premium dollars then other types of insurance.

When you’re older, you may have much less need for insurance coverage. If you’ve saved and invested wisely, you should have a significant amount of accumulated cash. Once you have these resources, you’ve eliminated your need for protection against untimely death. You’ve become “self insured”.

For most people, the major goal is to accumulate money for a secure retirement, and life insurance is simply a way to protect your family until then.

Of course, individual circumstances may dictate special needs.

How Much Life Insurance is Enough?

How much life insurance do you really need to protect your family? If you’re like most Canadian families, probably much more then you have! Six to eight times your annual salary is a good rule of thumb, depending on cash assets, lifestyle, and dependents.

Whatever coverage you choose, buy only one policy, and put the entire coverage amount on that policy. Separate policies mean separate fees and could cost far more!

More information about Life Insurance

Consider these Four Facts about Life Insurance

Before you decide make sure you Buy the Right Kind of Life Insurance

Everything you have to know about Term Life Insurance

Questions about Cash Value and the answers your should know.

Is Life Insurance a Good Investment? find out why or why not!

Important Tips for Making a Wise Insurance Purchase.

Money Saving Tips When Buying Life Insurance

Have You Made These Life Insurance Mistakes?

What to Consider When Replacing a Policy?

Related posts:

1. Term Life Insurance
2. Money Saving Tips When Buying Life Insurance
3. Have You Made These Life Insurance Mistakes?
4. Four Facts about Life Insurance
5. Is Life Insurance a Good Investment?
6. Tips for Making a Wise Insurance Purchase
7. Some Questions about Cash Value

Tags: Life Insurance, Term Life Insurance

This entry was posted by FP on Friday, May 8th, 2009 at 6:54 PM and is filed under Financial Knowledge, Life Insurance, Term Life Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.