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BY PHIL LENAHAN
are a couple in our late 20s and are just starting a family. I’m looking into
life insurance and it seems pretty complicated. How much insurance should we
purchase, and how do we determine which type of policy will best meet our
life insurance is a little like undergoing a root canal. We don’t like it, but
we know it’s something we need to deal with. While Scripture doesn’t specifically
address life insurance, it does tell us about our responsibility to provide for
our family. In 1 Timothy 5:8 we read: “If anyone does not provide for his own
relatives and especially for members of his immediate family, he has denied the
faith; he is worse than an unbeliever.” Insurance is a tool to help us meet
you can make an informed purchase, it’s important for you to understand the
different policy types and why you are buying insurance in the first place. In
addition to offering basic life insurance, the industry has evolved to offer
products geared to investors and estate planners, making decisions for the
consumer much more complicated.
insurance comes in two basic forms: term and cash-value. Term insurance is
basic insurance for the sole purpose of providing a fixed benefit in the event
of the death of the insured. Cash-value (included in this category are whole
life, adjustable life, universal life and variable life) combines insurance,
investment and, sometimes, estate-planning objectives.
most families are concerned with having insurance coverage during the
childrearing years, term insurance ends up being the preferred option because
of its relative affordability. If you want to use insurance as a method of investment,
or think you have a need for insurance coverage during your retirement years
and want to consider a cash-value policy, it would be a good idea to visit with
your insurance agent and your financial planner.
key question is
determining how much insurance you need. Some people recommend nine times your
level of annual gross earnings. Yet no one answer fits every situation. You’ll
want to take into account your ongoing expenses and future major expenditures,
such as debt repayment, college tuition or the purchase of a new car. Then
compare the earnings that can be generated from the amount of insurance
purchased to your annual expenses.
For example, $1 million in insurance at a conservative 5%
return would yield $50,000 per year, without having to dip into the principal
balance. By comparing the return on your invested insurance proceeds with your
anticipated expenses, you can better understand how much insurance is right for
Remember that there are scores of companies selling life
insurance. While price is certainly important, you’ll also want to consider the
financial strength of the company you are dealing with. Look for a rating of A
or better from A.M. Best, a company that rates the financial strength of
insurance companies. As with any purchase, comparison shopping results in great
savings. It would be a good idea to obtain a number of quotes before making a
God love you!
at Catholic Answers in El Cajon, California.