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Understanding
Life Insurance... Page 2
continued
Match your current
situation with one of the following family structures:
- Single Woman. You
should have little need for life insurance unless you're supporting an elderly parent,
sibling or other individual dependent on your income. Make sure you have enough money to
cover debts or expenses related to your death.
- Single Mother. You
need life insurance to protect your children. The younger your children are, the more
coverage you'll need. Consider the future costs of raising your children -- medical,
college, clothes, etc.
- Working Couple (no
kids). Your insurance needs may be limited unless you're supporting an elderly
parent or other dependent. Buying insurance for this type of scenario depends on a few
factors. Do you have outstanding debt or loans? Will it be possible to live on one
partner's income alone? Is it possible that one day you'll start a family?
- Working Couple
(kids). This scenario includes stay-at-home moms or dads. Both parents should be
insured. If either of you die, could the other spouse financially handle taking care of
the children (cooking, cleaning, child care)? Are your life insurance proceeds enough to
cover these types of costs? If not, you should consider raising your insurance to a higher
level -- where the cash-flow generated by the death benefit will meet or exceed these
expenses.
- Retired Couple
(empty nesters). The need for life insurance diminishes for older adults as they
near retirement. At this stage in life, homes and other debt are often paid off, kids are
out of college, and income from pensions or investments are enough to cover the unforeseen
-- such as funeral or burial costs. You may need insurance coverage for both you and your
spouse if your source of retirement income is modest or you want to offset estate taxes
for your heirs.
- Children.
Children rarely need life insurance policies since they don't normally produce valuable
income for the family. You might want to buy life insurance for your child in order: to
lock in a low premium while your child is still very young, to help secure insurability
for your child at an early age, or to use the policy as an investment (cash value, tax
deferral, etc.).
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