How to Protect Yourself and Your Loved Ones with Life Insurance


Written by Rosen

Our life is the greatest treasure of all. This is a common saying, yet most people don’t take any action when it comes to protecting their most precious asset – their life.

A 2019 Barometer Study conducted by Life Happens and LIMRA shows that only 57% of American adults have life insurance. On top of that 32% of people who are actually insured have group coverage only, which isn’t by any means sufficient. Also, by having group insurance solely you are very dependent on your employer.

That brings the number of individuals who have taken care of this important aspect by themselves below 40%. And it is debatable whether these folks have indeed an adequate coverage. As independent research shows the percentage of people with sufficient life insurance coverage can be as low as 20%.

If we compare that to car insurance where the number of insured is around 87% it just doesn’t make any sense. Or wait… car insurance was mandatory, right? Therefore, if we don’t have one we will receive a fine.

So basically what turns out? Is the escaping of a penalty way more important than the protection of our own lives? Above all, is it more important than the prevention of the financial struggles our family will face if we pass away, without having any protection?

We often think about the future. However, when it comes to preparing for the worst-case scenario we don’t take any action. By doing that we also fail to secure the well being of our loved ones and we just leave it for later…When it is usually too late.

So to provide your closest ones with the protection they deserve, let’s begin with

How Much Coverage Do you Need?

There is some common advice when it comes to calculating how much coverage you need with your life insurance policy. However, it is overly simplified and the recommendations are just to multiply your annual income by 5 or 10 to come up with the sum.

While this might serve the purpose in certain cases it is still better to pay more attention to that aspect. Now, it doesn’t have to be rocket science either, some basic second-grade mathematics will do.

Here are the few simple steps to follow:

  1. Calculate all your current and future expenses you need to cover. For this example, let’s suppose you want to cover your family for 10 years ahead.

    – Your annual income is $40.000, so 40.000 x 10 = 400.000
    – An outstanding mortgage of $100.000
    – A personal loan of $10.000
    – Pay for your kid’s college $80.000
    – Cover the expenses of your funeral $10.000

Total of $600.000

2. Figure out if you already have some coverage and the worth of your assets.

– If you are employed check how much your group insurance will cover, let’s say $50.000
– $20.000 in savings
– Non-retirement investments worth $40.000

Total of $110.000

3. Subtract the second number from the first one. 

$600.000 – $110.000 = $490.000 of coverage needed to protect your family and solve their financial struggles for at least ten years ahead.

If you don’t want to bother doing these calculations we can make it even easier for you.
Just visit this coverage calculator, enter the amounts and see how the magic works.

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Featured Image Courtesy of Flickr

So now that you know what you need, you should consider how to obtain it. For that purpose, we will examine the 2 main types of life insurance policies out there – term and permanent.


Term Life Insurance

Term life insurance is the simplest form of life insurance you can buy. It basically does one thing – pays out a fixed predetermined amount in case you die. The sum is paid to your beneficiary (beneficiaries). The installments of the so-called ’’death benefit’’ can be paid out monthly, annually or as a one-time payment (lump sum).

The only way for this policy to fail is if you don’t pay your premiums. Fortunately, this won’t be much of a burden as term life insurance is usually easily affordable, especially for younger people.

For somebody in his mid-20s or even mid-30s, it could be about $30-$40 per month to get coverage around $500.000. |

Furthermore, that’s with a fixed price contract for 20-30 years ahead. If you decide to do it between your late 40s or 50s it could be much more expensive. This is why it is good to consider signing up for life insurance early on.

The main disadvantage of term insurance is that it lacks guaranteed cash value. What that means is that all the money you paid for premiums is treated as an expense. You don’t get anything back in case your policy expires and you are still alive.

This, however, is a common feature of the next type of life insurance

Permanent Life insurance


Permanent life insurance strives to combine the best of both worlds. It acts as life insurance and as an investment account at the same time. This is beneficial because it allows you to be protected while growing some portion of your money, so you can use them yourself.

The longer you pay your premiums the highest the cash value grows.

Another awesome feature of permanent life insurance is that it doesn’t expire. It continues until you either die or end your contract.

Specifics of how much life coverage is included, how much of the premium goes to cash value growth and similar,  depend largely on your type of policy and of course, its conditions.

There are 3 main types of permanent life insurance – Whole Life Insurance, Universal Life Insurance, and Variable Universal Life Insurance. You can read more about them here

What’s next?

Congratulations on reaching this far. You are now aware of how much coverage you need and how to supply it.

There is only one thing left. Before you proceed you need to avoid the number one mistake people are doing when it comes to life insurance. And that is…

Not Having Any Life Insurance At All

So don’t leave the future of your loved ones uninsured. Take action today, so they will be protected tomorrow.


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