Just as no two people are alike, life insurance has no one-size-fits-all formula for the amount of coverage one should have. The type of life insurance and amount of coverage you should choose are based on such factors as your income, number of dependents, any existing coverage that you may have, and future anticipated expenses that your family may incur, such as college tuition or home mortgage amount. It’s therefore important to carefully select a life insurance policy and coverage amount to help ensure that you have adequate coverage should something happen to you.
Here are some considerations for choosing your coverage:
• Term Life or Whole Life Insurance. As the two main types of life insurance, Term Life and Whole Life each have benefits. Term Life insurance provides coverage for a specific duration of time and is typically less expensive than Whole Life. Whole Life insurance provides coverage for up to your entire life. Each type of insurance also typically offers various coverage options. Both the Gerber Life Term Life Insurance Plan1 and the Gerber Life Whole Life Insurance Plan 2offer coverage from $25,000 to $1,000,000.
• Income Replacement. Parents and grandparents should determine how many dependents rely on their income for financial support. First, calculate your monthly income that would need to be replaced if you were no longer here. In addition, calculate your monthly bills, your outstanding debt, and any other monthly family expenses. If your spouse has an income, the amount of coverage you need might be reduced. Then, make sure that your expenses, minus your spouse’s income, would be covered by the life insurance coverage amount that you select.
• Existing life insurance coverage. Some employers offer their employees life insurance coverage as a part of the benefits package. If you already have life insurance coverage, make sure that it’s sufficient to cover the monthly expenses you have calculated. If it doesn’t, consider adding more coverage or buying an additional policy that better suits your needs.
• Planning for future expenses. Do you plan to help your children or grandchildren pay for a college education? Higher education can be very expensive, and paying for it may require that you save for several years. Although you may not know the exact amount of your child’s college expenses until he or she is accepted into college, you can get an estimate by using the college savings calculator from the College Board. When calculating how much life insurance coverage you’ll need, be sure to include the cost of college for your child as well.
For further insight about choosing a life insurance policy for you or a family member, use the Gerber Life life insurance tool.
1 Policy Form Series SLT-05;
Policy Form ICC11-LTL, Policy Form Series LTL-11
2 Policy Form ICC13-SWLP, Policy Form Series SWLP-13;
Policy Form ICC13-HWLP, Policy Form Series HWLP-13