You know you want to get life insurance coverage for yourself or your family and yet concerns of how expensive this will be and how much you should get, plague you. You're not alone. While six in ten people have a life insurance policy and even more recognize the value of it (according to LIMRA), most people hugely overestimate the actual cost of life insurance. It's often assumed that in order to get enough life insurance to adequately cover you, you'll have to pay a fortune. And what exactly should I be covered for anyways?
These are all very common questions and ones we would like to help answer here. The first and most important thing to do is to address the incorrect assumption about high costs. While the cost of most everyday items has increased over the decades, term life insurance costs have, in fact, gone down. The cost of insurance for a 40 year-old, non-smoker in 1994 was roughly $995 per year. In 2014, the cost of insuring a man in the same position, was closer to $355 per year (read more here). This is a decrease of over 65%, making life insurance far more affordable. According to a LIMRA study in 2016, a 20-year, $250,000 life insurance policy for a healthy 30 year-old only cost $160 per year! When respondents in the study were asked to estimate what they thought this policy would cost, the average guess was $400 per year, a huge overestimate.
How Much Life Insurance Should I Get
So what does it really cost for you? Before you go in to meet with an independent life insurance agent who will be able to compare policies from different companies for you, it's good to have a basic idea of what you need. Here's a quick guide as to how much life insurance coverage you should get:
- Consider what insurance you will need for a specific period of time. For instance, if you're a married, small business owner with two kids, you may want to consider the cost of your children’s education ($200,000), any debt you currently have (for instance $15,000 in car loans, $10,000 credit card debt, $15,000 remaining student loans for yourself), and mortgage payoff ($175,000). Adding all of these costs together, our married parent and business owner would be looking at an insurance need of $415,000. Here's the breakdown:
College Education $200,000
Mortgage payoff $175,000
Term total $415,000
- The second category to look at is permanent life insurance needs. This is where things like final expenses for funeral costs come in as well as charitable bequests, capital required for the survivor’s income, emergency funds, etc. For the same married business owner above, this could breakdown as follows:
Final Expenses (2 adults) $20,000
Emergency Fund $10,000
Charitable Bequest $10,000
Capital Required for survivor $100,000
Permanent insurance total $150,000
For this person, the total life insurance need of these two categories combined is $520,000. Obviously, each family and individual will have slightly different needs depending on their life situation and life stage. This is why it's so important to sit down and go over your own needs carefully so that you get the right coverage. The free life insurance ebook we have created below will both give you more detailed information, as well as provide you with a starting point to help you calculate your own needs.
Find an Ohio Life Insurance Company
Once you've calculated your estimated needs, come in to see an independent life insurance agent. They will be able to answer any questions that arise and give you feedback on your estimates as well as realistic cost. In addition, independent insurance agents will be able to find the most affordable life insurance policy for you, given your specific needs.
Download our free eBook "Why Life?" A guide on what you need to know about life insurance.