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Life Insurance can help protect your family by replacing lost income or providing funds to pay outstanding bills or taxes in the event of your death. While many of us do not want to consider what happens after we’re gone, it’s important to understand what life insurance means for you should you choose to purchase it.

  • Your need for life insurance can change over a lifetime. If you are thinking about life insurance as financial protection for your family in case of your death, here are some scenarios which show how needs may differ:
    • Single adults may not need much life insurance, unless they are single parents or support someone such as an elderly parent.
    • Working couples without children or dependent parents may not need much life insurance, if the surviving spouse is able to make a good income and there are no major debts to pay off.
    • Families (including single parent households) usually need life insurance because young children depend on their income. People with grown children are less likely to need life insurance, for instance if you are over 65 and your children live independently.
  • There is no precise formula to tell you how much insurance coverage you need, however, it is usually recommended that you purchase between five and ten times your gross annual income. Under this formula, a family with an income of $40,000 might need at least $200,000 worth of life insurance protection.
  • Before buying life insurance, assemble your personal financial information and review your needs. You should consider:
    • Immediate needs at the time of death, such as final illness expenses, burial costs, and estate taxes.
    • Funds for a readjustment period, to finance a move or to provide time for remaining family members to find jobs or better-paying jobs.
    • Ongoing financial needs such as monthly bills and expenses, outstanding debts, day-care costs, college tuition, support for elderly parents, and retirement.
    • You also need to take into account any assets you have, such as cash; savings; Social Security and pension benefits; other insurance, including mortgage insurance; and, real estate. Some of these assets will be available for immediate use, some to finance a readjustment period, and others may help your family meet long-term, continuing needs.
  • Not all life insurance policies are the same. There are four basic types of life insurance: Term Life Insurance, Whole Life Insurance, Universal Life Insurance, and Variable Life Insurance.
    • Term Life Insurance policies provide a check to your beneficiary when you die. Term Life Insurance policies generally are cheaper and easier to understand than other kinds of life insurance policies.
    • Whole Life Insurance may be called straight life, ordinary life, or permanent insurance. Whole Life Insurance covers you for as long as you live, as long as you pay the premiums.
    • Universal Life Insurance, also referred to as Flexible Premium Universal Life, lets you vary your premium payments and when you will pay the premiums, with some limits on how flexible you can be.
    • Variable Life Insurance benefits (both the death benefit and earnings) vary based on the investment performance of the assets in which your premium payments are invested. You will generally be offered a variety of investment options (equity, bond, and money market mutual funds). Death benefits and cash values are directly related to the performance of investment options you choose.
  • There are no restrictions on the amount of beneficiaries you can name, or how you decide to divide your assets amongst them. It is also recommended you name a second beneficiary, also known as a contingent beneficiary, in case something were to happen to your primary.
  • It is the responsibility of the beneficiary to alert the insurance company of your death, which is why it is important to keep your policy information safe and accessible, and keep your beneficiary fully informed. A death certificate or other legal document will be required to verify your death.

More information about life insurance can be found on the Division of Insurance’s website. If you have questions about your particular policy, or are looking into purchasing one, contact your insurance agent or company.

The National Association of Insurance Commissioners (NAIC) has created a national service that provides consumers with search capabilities to help find a deceased person’s lost life insurance policies and annuities. Check for lost life insurance policies here:

If you have additional questions, contact the Office of Consumer Affairs and Business Regulation by calling our Consumer Hotline at (617) 973-8787, or toll-free in MA at (888) 283-3757, Monday through Friday, from 9 am-4:30 pm. Follow the Office on Facebook and Twitter, @Mass_Consumer. The Baker-Polito Administration’s Office of Consumer Affairs and Business Regulation along with its five agencies work together to achieve two goals: to protect and empower consumers through advocacy and education, and to ensure a fair playing field for Massachusetts businesses. The Office also oversees the state’s vehicular and customized wheelchair Lemon Laws and Arbitration Programs, Data Breach reporting, Home Improvement Contractor Programs and the MA Do Not Call Registry.

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