Life Insurance - Do Your Children Have The Right Coverage?

According to some estimates, about 30 million Generation X and Y people in the country do not have adequate life insurance coverage. In their younger years the thoughts of family, responsibilities and death are not serious concerns. However, time passes quickly and responsibilities grow faster than they think are possible. With so many competing financial obligations and life insurance options available, finding the right coverage is not easy.If you are the parent of a young person starting an independent life, talking to them about life insurance is not interference, it is parental guidance. Here are the 3 basics of life insurance that you should discuss with them.

Do You Need Life Insurance?

If you are single and have no dependents, you may not need life insurance. If you are working, you may qualify for a small policy through your employer which will cover the basic funeral expenses if you die. However, if you are married, or have taken on guardianship of siblings or have people who are dependent on you, then life insurance is no longer an option. You need to ensure that those who depend on you are taken care of if you should die. The younger the age at which a policy is taken out, the less expensive it is. Beneficiaries can always be changed as circumstances alter.

How Much Do You Need?

This is difficult to decide. Millennials will not be able to appreciate the financial liabilities that are placed on them as they progress through life. As a parent, you can use your own example of where you were 20 years ago and where you are now. That will provide a framework for what they have to plan for. They need to look at where they will be 10, 20, 30 and 40 years from now and what their responsibilities will be. In general, the coverage should be enough so that their dependents can live off the interest. This will include paying off any debts and paying for children’s education. These may be difficult to determine so much in advance, but by planning for the future in 5 or 10 year blocks, getting the right coverage will be easier.

What Type Of Life Insurance Is Right For You?

Term life insurance, as the name implies, is a coverage that is taken for a fixed period of time. If the policyholder dies during the validity of the policy, the beneficiaries will be paid the policy value. A whole life policy provides for lifelong coverage and contains a tax deferred investment component called the “cash value.” Money can be borrowed against the policy or it can be surrendered for cash. Both options have their pros and cons.

Professional Guidance Is the Best Option

Once the need for life insurance has been understood and accepted, an insurance broker should be consulted. An insurance professional will be able to explain the intricacies of life insurance, the various options and how the coverage can be changed to meet the demands of different stages of life. Insurance is a constantly evolving business and the coverage you, as a parent have had over the years, may not be the best for your children.