Life Insurance: Three Questions to Ask

This content is provided courtesy of USAA.

1. Who should buy life insurance?

Everyone needs to consider life insurance. It is primarily used to support someone who depends on your income after you're gone (a spouse, children, elderly parents or anyone else you help support).

Things to keep in mind when considering life insurance:

• Unlike many investments and inheritance options, life insurance death benefits are not subject to federal income taxes.
• With life insurance, the younger and healthier you are, generally the lower your premium rates will be.

2. How much do you need?

There's no magic formula, but you can start by figuring out what you want life insurance to do for you. Ask yourself some key questions to decide what fits your budget and circumstances.

• Do I want to provide enough money for my loved ones to pay for my funeral and unpaid bills?
• Do I have enough college money for my children or retirement savings for my spouse if I die suddenly?

If you're planning to leave the military, you should start shopping for life insurance about two months ahead. Your Servicemembers' Group Life Insurance policy won't be valid once you leave.

It can take up to six weeks to get a life insurance policy, so don't cancel your SGLI until your new policy has been issued and the first premium paid.

One option is to convert your SGLI to a five-year renewable term policy with Veterans' Group Life Insurance, which will provide up to $400,000 in coverage. If you're in poor health, this can be a good value. But if you're healthy, you'll probably find more affordable options elsewhere.

Even if your spouse doesn't earn an income, he or she is an important part of your family's financial security. Consider what it would cost to replace the childcare or other household tasks your spouse performs.

You received free coverage for your children under SGLI. To replace this coverage, you can add a child rider to your new policy.

More on military life insurance options:

• Life insurance 101 -- all the ins and outs of getting life insurance.
• Do servicemembers need life insurance?
• Nine tips for choosing life insurance

USAA's Life Insurance Needs Calculator can help you figure out the right amount for your specific situation.

If you still need help, talk to a financial advisor.

3. How long do you need it?

Consider whether you want term or permanent life insurance.

• Term Insurance: This is the most affordable option and is designed to provide coverage for a specified period.
• Permanent Insurance: Generally has a higher premium initially, but lasts for a lifetime. It also builds cash value.  

Life insurance and annuities provided by USAA Life Insurance Company, San Antonio, TX, and in New York by USAA Life Insurance Company of New York, Highland Falls, NY. Each company has sole financial responsibility for its own products. 

USAA means United Services Automobile Association and its affiliates.