Understanding Life Insurance: Find Out What You Need
Jan 23, 2025
3 min read
In December 2021, Farm Bureau agent Chad Baker passed away unexpectedly. Sharing Chad’s legacy, his wife Anna has made it her mission to help spread the importance of preparing for the unexpected. Watch their story about the value of life insurance and how it can protect your family – like Chad protected his.
What Kind of Life Insurance Do I Need?
Before you select your life insurance policy, let’s break down what life insurance is. Life insurance is the process of selecting an insurer and paying a set premium for an amount that will be given to your selected beneficiaries in the event of your death.
The type of life insurance needed differs by person. Choosing the right policy requires evaluating what income your loved ones would miss throughout the years you are absent.
Different Types of Life Insurance
When it comes to life insurance, consider these key differences between term and whole life insurance.
Term Life Insurance
This option offers affordable coverage for a specific period, often 10, 15, 20 or 30 years, and allows you to reassess your life insurance needs over time. You pay only as long as your coverage lasts. At the end of your term, you can choose to maintain the policy as it is, convert some or all to a permanent policy, or reduce your coverage if less is needed.
Whole Life Insurance
Whole life insurance is also referred to as traditional or permanent life insurance. This coverage lasts throughout the insured’s lifetime, given that premiums are paid. These premiums remain the same, and there are options for the number of years you pay the premium until the policy is paid up. Whole life insurance also allows you to accumulate the cash value from your policy as you pay your premiums, which means you can borrow against your policy if needed.
Life Insurance Needs for Your Life Stage
Life insurance is important to have at all stages of life but it may pay off in the long run to get it sooner rather than later.
Life Insurance in Your 20s
Life insurance for young adults is generally inexpensive. Your health at the time of selecting your life insurance policy can have an impact on your premium. By purchasing a policy when you are young and healthy, there's a good chance your premium will be lower than if you wait until later in life. The driving motive for life insurance at this stage of life is often to cover any debt you may have such as student loans, mortgages or car loans. This also would protect any of the co-signers who may have helped you secure any of your loans.
Life Insurance in Your 30s and 40s
Your career and income have likely increased throughout your 30s and 40s, and you may have children who are financially dependent on you. You may want to reassess your coverage based what income your family may miss if you were gone. This is a good time to consider Indexed Universal Life insurance, which allows you to save for retirement and have coverage to protect your loved ones in the case of your death.
Life Insurance After 50
As your life changes, so does your life insurance needs. As you approach retirement, you may want to consider a daily living rider. With this you can receive a portion of your policy’s death benefit if you become chronically ill or are unable to perform two of six essential tasks of daily living — eating, toileting, transferring, bathing, dressing and/or continence.¹
If you are debt-free, no longer working and your children are financially independent, you may want to reduce your life insurance coverage.
How Much Life Insurance Do I Need?
To avoid the risk of being underinsured, take the time to calculate how much life insurance you need. This means reviewing both your financial and family situation. Take into consideration the following factors:
- Funeral costs: Funeral costs can be expensive. According to the National Funeral Directors Association (NFDA) the average cost of a funeral and burial is $8,300.
- Outstanding debt: Do you have student loans, mortgages or car loans in your name? If you had a co-signer they would be on the hook if you passed away. Having life insurance to cover this debt would protect them from an unexpected financial burden.
- Income replacement: Calculating how much life insurance you need can be difficult. Breaking things down by monthly income can help. Ask yourself, how much money would my family miss each month?
We Have Resources to Help
Calculating your life insurance needs doesn’t have to complicated. With our life insurance calculator, answer just a few questions to get an estimate of how much life insurance you may need.
If you’re in the market for life insurance, consider Income Guard Term Life Insurance. This provides financial certainty to your loved ones with tax-free, monthly benefit payments for a set number of years and a $20,000 lump sum payment to cover funeral expenses.