The need for life insurance

If you have dependents or others that count on you for financial support, you may have a need for life insurance. Life insurance provides a lump sum or annuity payments upon the death of the insured person.

For example, Rich and Joan Brown are a young married couple with two young children. Joan is a stay-at-home mom, and the family relies on Rich's income for their living expenses and mortgage. If Rich were to unexpectedly die, Joan and her kids would be forced to make significant lifestyle changes, including Joan's returning to work, unless Rich had an adequate amount of insurance coverage.

Life insurance is an important part of this couple's financial plan. For most people who have a short-term insurance need, term insurance is appropriate. For the Browns, their need for insurance coverage is less than 10 years, since Joan plans to return to work in 10 years when her youngest child is age 10. Term insurance generally provides the most bang for your insurance buck.