Life INSURANCE FAQ's
Q: |
How much life insurance should an individual own? |
A: |
Rough "rules of thumb" suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed.
It is recommended that a person's Robinson Insurance agent be contacted for a precise calculation of how much life insurance is needed. |
Q: |
What about purchasing life insurance on a spouse and on children? |
A: |
In certain circumstances, it may be advisable to purchase life insurance on children; generally, however, such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s). It is of utmost importance that the income earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance before contemplating the purchase of life insurance on children or on a non-wage earning spouse. In a dual-earning household, it is important to protect the income earning capacity of both spouses. Life insurance on a non-wage earning spouse is often recommended for the purpose of paying for household services lost at this individual's death. |
Q: |
Should term insurance or cash value life insurance be purchased? |
A: |
Although a difficult question--one whose answer will vary depending on circumstances--several principles should be followed in addressing this issue.
The question contained in (1) involves an "insurance" decision and the question contained in (2) requires a "financial" decision. |
Q: |
How does mortgage protection term insurance differ from other types of term life insurance? |
A: |
The face amount under mortgage protection term insurance decreases over time, consistent with the projected annual decreases in the outstanding balance of a mortgage loan. Mortgage protection policies are generally available to cover a range of mortgage repayment periods, e.g., 15, 20, 25 or 30 years. Although the face amount decreases over time, the premium is usually level in amount. Further, the premium payment period often is shorter than the maximum period of insurance coverage --for example, a 20-year mortgage protection policy might require that level premiums be paid over the first 17 years. |
Q: |
Can an existing life insurance policy be used to provide for the repayment of an outstanding mortgage loan? |
A: |
Yes, the purchase of a new mortgage protection term insurance policy is usually not required by the lender. An existing policy, either term or cash-value life insurance, can be used for many purposes, including paying off an outstanding mortgage loan balance in the event of the insured's death. |