Does someone depend on your income for his or her living expenses?  If yes, you need to know something about life insurance.

Term insurance is the most common way to protect your family members from loss of income if you die.  Yes, I know we are all going to live forever, but term insurance is an inexpensive way to protect your loved ones if you don’t life forever.

Term insurance pays out a lump sum if you die during the term on the policy.  It has no investment component.  A rule of thumb is your policy coverage should equal ten times your annual gross income.  Lifehappens.org and aarp.org offer calculators to determine the amount of insurance coverage you need.

Term insurance is often offered as part of your employee benefit package.  You can usually buy additional coverage through this group policy.

If you don’t have this employee benefit, there are many online insurance company sites to help you buy this coverage.  Or you can contact an insurance agent who can help you buy this coverage.

What if you are injured and you cannot go back to work and you have no income?  Many employers will pay your salary for a short-term disability, but you may be out of luck if you have an injury that takes you out of the job for a long time or forever.  You may need disability insurance that replaces some percentage of your income if you become unable to work for a long period of time.  You can work with an insurance agent to see if you need this coverage.

Whole life insurance is another category of insurance.  There is no term on this policy.   Universal life offers coverage for your entire life plus the ability to build cash value on a tax-deferred basis.  Variable universal life has an equity investment component that builds cash value.  You can borrow against that cash value at stated interest rates.  If you think you need this type of coverage, you should talk to an insurance agent.

Make sure you reassess your life insurance when your life situation changes.  Did you get married?  Have you had another child?  Are you helping to take care of a parent or sibling?  Has your income significantly increased?  All of these events may impact the type of life insurance you hold and the coverage.

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Kowalczyk question:  Did your parents or grandparents buy you a life insurance policy when you were born?  If yes, you should determine if you should continue to hold this policy or not now that you are an adult.