How can I protect my family with life insurance?

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If you have a spouse or children, make sure you have adequate life insurance coverage.

There are two types of life insurance. You can either buy pure term insurance coverage or a plan that can last a lifetime with various investment vehicles that can gain value and enjoy tax advantages while the policy remains in force.

Lifetime plans can resolve estate-planning problems. With additional investment vehicles (some include the use of the life company’s dividends) the cost of lifetime insurance coverage is higher. Yet the tax-free death benefit can solve estate-planning problems such as paying an estate’s tax liability on capital gains.

Life insurance is generally affordable. If you can’t afford the premium for lifetime coverage, consider term insurance or a combination of both. Term plans are quite affordable. For example, at 3%, $1,000,000 will generate $30,000 annual interest as pre-tax income.

Buy enough insurance to meet your needs. Many families need $250,000 or more—even up to $1,000,000 during low-interest periods—to generate adequate investment income if the breadwinner were to die.

Ask your insurance representative to do a capital needs analysis. You will want to replace the income of the life insured—either yourself or your spouse. It is easy to calculate the capital needed over any short or long period of time in any situation if the life insured were to die.

Buy the insurance you need when you are healthy. If you get high blood pressure or diabetes or suffer from angina before you buy insurance, you may find that your premiums will be higher than for a healthy person. So buy as much as you can afford when you are younger, and healthier if you have capital needs in relation to your dependents.

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