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Life Insurance: How Much Is Enough?

Thinking about your life insurance needs is probably not your favorite topic. At best, it may seem boring. It may even be depressing. However, thinking about and purchasing appropriate life insurance is really just the responsible thing to do. It is a way to take care of those you love most, even after you are gone. At the very least, life insurance guarantees that funeral costs and other costs associated with your passing will not be a burden. But more than just that, life insurance should make managing finances workable, at least for a time, for those you leave behind. Many people have a life insurance policy through their employers, as a part of their benefits package. But is it enough?

What Kind of Life Insurance Do Employers Provide?

Most employers provide what is known as term life insurance. Term life insurance is a basic type of policy. Term life policies do not accrue a cash value, so they are not investments. Should the insured die while the policy is in force, the person or people listed as beneficiaries on the policy will be paid death benefits. Term life insurance policies are not connected to your will or your estate planning. They pay out simply to the people or person you have listed on file. It is recommended, then, that you make sure that the information on file with your employer is kept up to date.

Are Employer-Provided Term Life Insurance Policies Enough?

In most cases, no, a term life insurance policy is not enough. If you have a spouse or children who will suffer financially should you pass, most employer-provided term life insurance policies are not enough to support their basic living expenses.

What Are Other Options for Life Insurance?

It is best to speak directly to your Des Moines local insurance agents. However, you have several options. You may want to consider a guaranteed cash-value policy. This type of policy pays out benefits in the event of death, no matter your age. An agent can advise you specifically, but many experts recommend that you purchase a policy that will pay out ten times your current salary in benefits. This means that if you currently make $50,000 a year, you likely want a policy that will pay out $500,000 in the event of your death. A cash-value policy has the benefit of also accruing cash value during the insured’s lifetime, in addition to paying out upon the event of the policy holder’s death. You can use this accrued cash value as tax sheltered investment. You can even borrow from the policy. This makes cash-value policies much more flexible than term policies.

Where Can You Purchase Life Insurance?

In some cases, you can purchase additional coverage through your employer. However, it’s probably the best option to purchase your own term or cash-value policy privately. This has the advantage of being portable, should you leave your current employer. Additionally, employer-provided insurance often goes up in cost as you age, whereas privately purchased level term life insurance will maintain the same premium.

Privately purchased term life insurance is generally priced affordably. That is, most relatively young people can purchase a guaranteed term policy that provides the recommended benefit at a monthly cost that they can afford. Again, consulting an insurance agent is recommended.

Most of us do not want to think about life insurance in part because it’s uncomfortable to think about death. However, you owe it to the people in your life to consider your options and make responsible choices. This is even more so the case if you have a spouse who would suffer financially in the event of your death or if you have children.