Tips for Choosing the Right Life Insurance Coverage for Your Needs
By Brian Famigletti, Managing Director & Head of Marketing
Financial Protection
Choosing life insurance coverage is a key cornerstone of any financial plan. Let’s start by understanding its purpose.
Life insurance provides a death benefit to designated beneficiaries. This coverage can help support financial stability during a difficult time while offering piece of mind that loved ones will be protected.
Proceeds may be used to cover funeral expenses, repay outstanding debt, or fund education. They can also help replace lost income or support ongoing living expenses. In some cases, policyholders may choose to direct proceeds to charitable organizations.
In addition to helping transfer wealth, life insurance is an important tool for managing financial risk. And having the right coverage can help reduce uncertainty and preserve long-term financial plans.
Understanding Coverage Options
Choosing life insurance coverage requires evaluating the two primary types of policies: Term insurance and permanent insurance.
Term insurance provides coverage for a defined period, often 10 to 30 years. It is generally more affordable and suited for temporary needs, such as filling a gap while you wait for a permanent policy to be approved.
Term policies can be used to align with specific financial obligations. Examples include mortgage debt or education funding timelines. Once the term expires, coverage ends, and the policy typically holds no residual value.
Permanent insurance, on the other hand, offers lifetime coverage, provided required premiums are maintained. In addition to the death benefit, these policies include a cash value component. This value may grow on a tax-deferred basis.
In some cases, policyholders can access cash value during their lifetime. This feature may provide flexibility for unexpected expenses or supplemental income in retirement. However, such strategies require careful planning.
Evaluating Costs
The cost of life insurance depends on several factors. Age, health, lifestyle, and occupation all influence premiums. Coverage decisions should reflect both current obligations and long-term goals, whether that’s saving for retirement or establishing a college fund for your children.
Employer-sponsored plans can provide a starting point. However, coverage is often limited and tied to employment, potentially leaving gaps if circumstances change.
Individual policies offer greater flexibility by allowing coverage to be tailored across different life stages. This may include adjusting coverage levels as financial responsibilities evolve.
Some policies offer optional features, such as long-term care riders. These allow access to benefits during life to help cover care-related expenses. Given the rising cost of long-term care, this feature may be worth evaluating.
Choosing life insurance coverage is a strategic decision. It requires coordination with broader financial planning, including retirement, estate, and tax considerations. The goal is to align protection with evolving needs while maintaining flexibility.
If you would like to review options for choosing life insurance coverage and how it fits into your broader financial plan, contact Griffin Asset Management to speak with an expert.
Source:
Morgan Stanley: How to Choose the Right Life Insurance for Your Needs
