How Long Will I Need Coverage?
You may first want to consider the size of the family you want to raise. Will this be your only child, or will there be siblings to come? If you're a new parent, you may want life insurance coverage that lasts for the next 30 years to cover raising your child and sending them off to college. Alternatively, if you have a college-bound senior, you may want to cover them just until they become self-sufficient adults. If you're a young, healthy parent, it can be easy to get the coverage you’ll need to help protect your children’s financial future.
Is Life Insurance Through My Employer Enough Coverage?
You may have a free or low-cost life insurance policy through your employer, but it's often not enough to cover your child and the needs of your household if you suddenly die. Most employer-provided coverage is for one to two times your annual salary, while experts recommend coverage for ten times your annual salary. As you can see, there is a big difference between what is recommended and what your employer may provide.
What happens if you leave your job? Can you take it with you? The answer may surprise you. Most employer-provided policies allow for a portability option (you can stay covered under the group policy by paying the premiums yourself) or a conversion option (you can convert all or a portion of your group coverage to an individual policy). If these options are available to you when you leave your job, you should look into the costs involved with retaining the coverage. While it is a good idea for some, it can be an expensive option for others. This is because you are paying premiums based on group rates, without underwriting. What this means is that in most cases if you are healthy, the premium to maintain the ported or converted policy will be much higher than if you are underwritten for a new policy. Your new policy can also be issued with a death benefit amount based on protecting more of what is important to you. If you cannot port or convert the coverage provided by your employer at the time you leave your job, you could find yourself without coverage.
Take your employee benefit if it’s at little or no cost to you, but consider buying an individual term life insurance policy as well to further protect your family, regardless of the amount or status of your employer-provided coverage. Individual term life insurance provides coverage for a fixed monthly payment (a premium) for a selected period of time (the term). Term life insurance is often used to protect your loved ones during your income-earning years, just like your employer-sponsored coverage; however, because you own an individual term life policy, you can decide the amount of coverage. You can also decide how many years you want your term coverage to last, whether it be until the mortgage is paid off, until the kids are out of school, or until you retire - it’s up to you!
Selecting A Term Length
So how long will you need term life insurance coverage? There’s no one-size-fits-all length for the number of years you may want coverage to protect your new family. As a guide, choose a length of time that will cover your children for the number of years you expect them to depend on you. Some factors you’ll want to consider include the age at which your children will likely no longer be your dependents, the age which you expect to retire, and when you expect to pay off your mortgage.
You may also want to consider adding a buffer for unexpected changes to your plans. For example, your child may come back to live with you after completing their college education. For this reason, rather than choosing a 20-year term length to cover your newborn child until they are eighteen - you may want to choose a 30-year term length to cover their needs in case you pass away while they are still or back living at home.
Selecting An Ideal Coverage Amount
Once you establish a term length, you’ll want to determine the coverage amount that should adequately protect your family’s financial future. Calculating how much life insurance you should buy is fairly straightforward. You could choose to multiply your current salary by ten. For example, if you make $50K/year, experts recommend that the amount of coverage you should apply for would be between $500K-$600K . Still not sure if that will cover everything? Try our life insurance calculator to get a better idea of what coverage amount might be right for you.
Regardless of any coverage you may have through work, you can easily protect your growing family with term life insurance. What are you waiting for? Check your rates today by clicking here.