Information courtesy of USAA Life Insurance Company and USAA Life Insurance Company of New York
Buying life insurance can sometimes feel like a game of 20 questions. There's a reason for it to feel this way. It can be overwhelming to think about the unexpected while trying to make the best long-term decisions for your family.
The process can be easier if you think through some basics on your own and with your family before you try to take action.
Consider this list of factors to make sure you apply for the type and amount of life insurance you need. If you take the time to get it right the first time, you'll have peace of mind for years to come.
Do I need life insurance?
At its core, you need life insurance when someone you love would be financially affected by your death. Realistically speaking, that's most of us. Think of life insurance as protection for your loved ones. It can help cover the costs to keep a roof over your family's heads, clothes on their backs and food on the table.
How much life insurance do I need?
Start with your current financial situation. The first thing you'll want your insurance to take care of is housing for your loved ones. Paying off a mortgage or supplying years of rent can help ensure financial stability for your survivors.
Next, think about income replacement. At a minimum, you should have enough coverage to pay off any debt you have and replace your income for at least five years.
What type of life insurance do I need?
Because your life is constantly changing, there's not a one-size-fits-all approach to life insurance. Term life insurance can help you protect temporary needs, like paying off debts, providing income replacement or paying for a child's education expenses. Permanent life insurance may be used to cover final expenses, replace retirement income, or aid with legacy and estate planning.
While they each serve a purpose, many find that using a combination of the two provides ideal protection and long-term flexibility.
Do I need anything more than group life insurance?
Coverage through your employer can be a great benefit, but it also has some drawbacks. The biggest disadvantage is that you usually don't own your employer's plan. If you lose your job or change careers, you might lose your coverage, too.
You should consider group life insurance, including Servicemembers' Group Life Insurance, or SGLI, as a supplemental to an independent policy that you own and control.
When should I get life insurance?
To protect your ability to qualify for the best rates, get coverage at the youngest age possible. If you wait too long, your health could decline to a point where coverage becomes unaffordable or not possible.
How long do I keep life insurance?
You want to keep life insurance as long as you need protection. Remember that term life insurance is generally used for foundational, temporary needs. Permanent life insurance is intended to be a possibility for the rest of your life.
There are very few scenarios where someone doesn't need any life insurance — especially when it comes to longer term, end-of-life planning.
Should I get life insurance on my children?
Protecting your children or grandchildren when they're young and healthy may give you some peace of mind. It can also help preserve their future insurability. Other benefits include the opportunity to use riders and benefits designed to help them transition their coverage into adulthood.
Do I need life insurance if I don't work?
While human life has immeasurable value, in terms of life insurance, every life provides an economic value to the household. If you're a non-working spouse, review all your responsibilities, especially when children are involved, and account for the financial cost of replacing those functions. Replacing child care alone calls for a serious discussion.
How do I choose the right company?
Choose a life insurance company that is financially sound based on ratings from sources such as A.M. Best, Moody's Investors Service and S&P Global Ratings.
By understanding your life insurance needs and the products that best meet those needs, you can make an apples-to-apples comparison of premium payments, death benefits, riders, fees and exclusions.
Align a company's financial strength, product offerings, reputation and customer satisfaction with your overall needs.
When should I review my life insurance?
Your life isn't on autopilot, and your life insurance shouldn't be either. Review your insurance annually, or when major life events happen, to make sure the amount, type and cost are still best for your needs.
Your annual reviews are also a great time to ensure proper ownership and beneficiary designations based on your circumstances. If you have additional questions, USAA's Licensed Life Insurance agents are here to help.
How much life insurance do I need?
Getting the right amount of coverage can help give you peace of mind. See note 1