FINANCIAL PROCESS: Do you have the right insurance?

You probably won’t see it on your calendar, but September is Life Insurance Awareness Month. And it is really important to realize the importance of life insurance. Do you have adequate insurance?

Most people are not. About 40% of Americans experience life insurance problems, either because they are uninsured or underinsured, according to a 2021 study by research and advocacy groups LIMRA and Life Happens.

The need for life insurance is simple: If something were to happen to you, would your family be able to continue their normal lives? Will the mortgage be paid off? Can your children still afford to further their education?

So, if you have decided to get or promote your life insurance, how much do you need? Your employer may provide insurance as an employee benefit, but it may not be enough. You’ve probably heard that you should have seven or eight times your annual salary. But this comparison is just that – a comparison. Everyone’s situation is different, and there is no single formula that will tell you how much insurance you need. To determine the amount of support you need, you need to consider a number of factors, including your age, the number of dependents, your and your partner’s income and the size of your debt.

Knowing how much you need is important, but you’ll also want to consider the type of life insurance that’s right for you. You have two important choices: term or permanent insurance.

As the name suggests, term insurance provides coverage for a specified period of time, such as 10, 20 or 25 years. Term insurance only provides a death benefit – there is no increase in the cash value of your policy. Generally, term insurance is considered cheaper, especially when you are young.

Permanent life insurance, on the other hand, provides both a death benefit and an income-generating opportunity. Because of this, premiums for permanent life insurance – which include “whole life” or “universal life” – are much higher than for term life.

What type of insurance should you choose? Again, it all depends on your situation and preferences. Some financial experts advise people to “buy the time and sell the difference” – that is, use the money saved from insurance premiums to invest in stocks and mutual funds. However, others argue, and point to the benefits of permanent insurance, such as the ability to borrow money to pay for unexpected expenses. Ultimately, when choosing between term insurance and term life insurance, you need to look at your overall financial picture to determine which option is best for you.

In fact, life insurance should be the most important component of your overall financial plan, along with your investment mix and the long-term goals you have set. Insurance can play a role in your estate planning, as you consider the best way to distribute assets to your family members and the charities you support.

Life Insurance Awareness Month lasts 30 days – but your need for life insurance can last for years. Make sure you are doing everything you can to protect your loved ones.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Edward JonesSIPC member. Kim Owen is a financial advisor at Edward Jones, 309 Southridge Blvd. Suite G. in Heber Springs. The office number is (501) 270-6868. Edward Jones is a licensed insurance producer in all states and Washington, DCthrough Edward D. Jones & Co., LPand in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, LLC, Edward Jones Insurance Agency of New Mexico, LLCand Edward Jones Insurance Agency of Massachusetts, LLC California Insurance License OC24309.