Are You Covered? Providing for Your Family's Future

KALAMAZOO, Mich. - Jan. 26, 2016 - PRLog -- With the holidays around the corner, your focus may be on selecting the perfect gifts for your family. However, it’s important to consider what may be the best gift: providing for your family should something happen to you.

We believe the foundation of your financial strategy should include plans to protect your family financially, which includes having an appropriate amount and type of life insurance.

Your Most Valuable Asset

While you’re still working, your most valuable asset may be your ability to earn income in the future. Life insurance can help protect this “asset,” helping to ensure your family will have money to replace lost income or pay for certain expenses should you pass away at an early age. If you have dependents and/or outstanding debt (like a mortgage), you likely need life insurance.

How Much Coverage Do You Need?

Here are two approaches to help estimate how much life insurance you may need:

• Multiple-of-income approach: Calculate seven to 10 times your pretax annual salary.

• Needs approach: Estimate your family’s expenses and savings needs over time using the acronym LIFE:

• Liabilities that include your mortgage, car loans, student loans, credit cards, etc.

• Income needs for your family to cover ongoing living expenses, savings needs and an “emergency” fund

• Final expenses

• Education expenses for your children

Either approach can provide you with a solid estimate of your insurance needs. Your financial advisor can help you refine them based on other resources that may be available for your family. This will help you determine how much insurance may be appropriate for your situation.

Coverage Through Work May Not Be Enough

While you may have life insurance coverage through your employer (known as group insurance), we recommend you consider an individual policy as well.

Doing so can help ensure you’re covered, regardless of where you work. If you are in good health, an individual policy could also be less expensive, and it may offer additional features and flexibility.

Sharing Your Strategy

When your family is gathered together this holiday season, consider sharing your strategy with them. For example, would they know how to access your life insurance policies? Let your family know now what you’ve set up. This can help reduce the strain on them later if something were to happen to you.

Two Types of Life Insurance

In general, there are two major categories of life insurance: term and permanent. Answer these questions to see which approach may be best for you.

How long do you need the insurance? Consider whether you need insurance for a specific amount of time. Maybe it’s until your children are grown – or maybe it’s more of a lifetime need. Generally, we recommend the following guidelines:

• Term insurance: An insurance need of typically 20 years or less*

• Permanent insurance: An insurance need of 20 years or more

What can you afford? Your financial advisor can work with you to determine the appropriate amount and type of coverage that fits within your overall budget. Reviewing your budget can also help highlight flexibility to reduce or adjust other expenses to address this need.

Decide What Makes Sense for You and Your Family

For most individuals who are providing for their families while also addressing other financial goals, we believe term insurance may be the most appropriate solution. However, deciding which type of insurance to buy doesn’t have to be an “either-or” discussion – you may decide to use both term and permanent insurance to cover different needs.

No matter what your current situation is, we recommend reviewing your insurance coverage with your financial advisor. This can be part of your regular reviews and should also be revisited after a life event that could change your needs, like the birth of a child or a job change. Together, you can look at your entire financial situation, compare all your options and tailor your life insurance to your life.

Important Information:

* Term insurance is available for longer time periods. However, we encourage comparing term policies of longer than 20 years to a permanent policy before making a decision.

Edward Jones operates as an insurance producer in California, New Mexico, and Massachusetts through the following subsidiaries, respectively: Edward Jones Insurance Agency of California, L.L.C., Edward Jones Insurance Agency of New Mexico, L.L.C., and Edward Jones Insurance Agency of Massachusetts, L.L.C.