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Life insurance for established families

By Maryalene LaPonsie on June 20th, 2011

Life insuranceLife insurance can protect your family and your assets. If you or your spouse should pass away, the right amount of life insurance coverage could allow surviving family members to pay off debts and maintain the same quality of life without having to sell investments or downsize your home.

Growing families mean growing life insurance needs

Many established families already have life insurance. A policy may have been purchased when a couple was newly married or upon the birth of their first child. For these families, the key isn't making sure life insurance is in place, it is ensuring that the family has the right level of coverage.

"Insurance needs increase because the standard of living increases," explains Marv Feldman, President and CEO of The Life and Health Insurance Foundation for Education (LIFE). "In many cases, these families have put themselves deeply in debt."

Feldman advises those with established families to remember that declining interest rates also impact life insurance needs. Generally speaking, families should anticipate investing the death benefit from a life insurance policy and drawing from the interest for regular living expenses. The capital should be preserved for emergencies or future needs. As interest rates decline, the death benefit should increase.

"Families should review numbers every year to every 18 months at a minimum," Feldman notes.

Term life insurance vs. permanent life insurance

Beyond the level of life insurance coverage, families must also determine whether to purchase term life insurance or permanent life. While permanent life, such as whole life insurance, provides guaranteed coverage so long as premiums are paid, term life offers temporary, less expensive financial protection.

The Minnesota Department of Commerce suggests that established families consider a combination of insurance coverage. According to the department, whole life insurance builds cash value that can be used for college tuition, while term life can be an inexpensive way to purchase the level of coverage needed to maintain a family's standard of living.

Feldman points out that determining the right level of coverage is important. Families should look at their cash flow to determine whether they can purchase the needed amount of coverage with term life, whole life or a combination of the two.

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