Life Insurance
Coverage that keeps your family's life on its feet if your income stops. Here is how the two main types work, when each one fits, and how to think about how much you need.
Two kinds of policy, and what each is for
Nearly every life insurance policy is a version of one of two things: coverage that lasts for a set number of years, or coverage designed to last for the whole of your life. Everything else is a variation on those two.
The right answer depends on what you are protecting and for how long. A policy is a tool, and the tool should fit the job. We would rather sell you the smaller policy that fits than the larger one that does not.
Start with the question, not the product
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Who depends on your income, and for how many more years?
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What would have to be paid off, or kept paid, if that income stopped tomorrow?
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What is already covered by savings, by a spouse's income, or by group coverage at work?
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Is this a need that ends on a known date, or one that lasts as long as you do?
Term Life Insurance
Term life insurance is the most affordable way to buy family protection for a specific term, generally from 10 to 30 years. It suits younger parents especially well, because it provides financial protection through the years when children are dependents and still in school.
Younger applicants in good health can buy substantial coverage at relatively low premiums. As life progresses, policy holders may convert part or all of that term protection into a permanent policy.
When term fits
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You have a clear window to cover, such as the years until the youngest child finishes school.
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You have a mortgage or other debt that will be paid off on a known schedule.
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You need the largest death benefit your budget will allow, starting now.
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You want the option to convert to permanent coverage later without proving your health again. Check that a policy includes a conversion privilege before you buy it, because not all of them do.
Permanent Life Insurance
Permanent life insurance is intended to last for longer periods of time. Like term coverage it provides protection for children until they are out of school, and in addition it aims to provide protection for a spouse for a lifetime.
Because the coverage is designed never to expire, the premium is higher than term for the same death benefit. Some permanent policies build cash value inside the policy and some do not, and that single difference has a large effect on what they cost.
When permanent fits
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You have a need that does not end, such as a spouse who would depend on the money at any age.
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You want to leave money to someone regardless of how long you live.
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You have a lifelong dependent, such as a child with a disability.
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You have estate or business reasons for coverage that must still be in force decades from now.
Legacy Life insurance
Most people plan to leave their estate to their children. Some would also like to leave additional assets to grandchildren, to nieces and nephews, or to a charity that matters to them.
Legacy Life is a concept we developed here at Hopper Insurance Services, and it is offered by this agency. It uses the structure of a guaranteed universal life insurance plan as an affordable tool to help our clients leave their legacy as they wish.
Why it is affordable
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Because this type of policy is built for the death benefit rather than for cash value accumulation, the premiums are substantially lower than traditional permanent life policies.
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That makes it realistic for people in their 50s, 60s and even 70s to budget a modest amount of premium and provide a substantial legacy to the people they love.
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The policy is designed to stay in force for life, so the money arrives whenever it is needed rather than expiring at a set age.
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You can name anyone you like, including a charity, and the death benefit goes to them directly.
How much coverage does a family actually need?
There is no single right number, but there is a right way to arrive at one, and it takes about fifteen minutes with a pen.
Replace the income, for the right number of years
Start with the income the household would lose, then decide how many years it needs replacing. For parents that is often the years until the youngest child is independent. For a spouse with no separate income it may be far longer.
Clear the debts that would be left behind
Add the mortgage balance, any other loans, and the ordinary bills that keep arriving either way. The goal is that nobody has to sell the house in a bad year simply to stay solvent.
Fund what you have already promised
If you intend to help pay for college or a trade program, include it. This is one of the most common gaps we find when we review an existing policy.
Cover final expenses and a cushion
Include funeral and medical costs, and then add enough of a cushion that your family is not forced to make large financial decisions during the first hard months.
Subtract what already exists
Savings, retirement accounts, a spouse's income and any group life coverage at work all reduce what you need to buy. Count group coverage carefully, because it usually ends when the job does.
Then check the number every few years
The right amount changes when you buy a house, have a child, change jobs, or finish paying the mortgage. We review coverage with clients rather than selling a policy once and disappearing.
A note on age, health and timing
Life insurance is priced on your age and your health at the time you apply, and both of those move in one direction only. The same coverage almost always costs less today than it will next year, and a condition diagnosed between now and then can change what is available to you.
We are insurance agents, not tax or legal advisors. For questions about taxes or estate planning we are happy to work alongside your accountant or attorney.
Coverage for the business itself
Business owners often need life insurance for reasons that have nothing to do with the family budget. A policy can fund a buy sell agreement so a surviving partner can buy out a departing owner's share, or it can cover the loss of a key person the business depends on to operate.
If you own a business, tell us, and we will look at both sides of the picture rather than only the personal one.
Related pages
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