How Much Life Insurance Do Military Families Need? 5 Questions Answered

An assortment of desk items, a form labeled "whole life insurance" and wood cutouts representing a family appear on a desk
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Life insurance can be a confusing subject. At its core, life insurance is simply a tool to protect your family and finances if something bad happens. I'm sure that statement doesn't eliminate the questions that exist, so here are answers to several of the most common questions I have received over the past decade when talking with USAA members.

1. Do You Need Coverage Outside of What Work or the Military Offers?

While you certainly don't want to break your budget from buying too much life insurance, it can make a lot of sense to have coverage both through your employer and on your own. Coverage you buy on your own travels with you. That "portability" provides advantages. That's especially true since all employers don't necessarily offer life insurance or the amount of coverage you might need. A nice blend of personal coverage and employer coverage likely works well for most families.

2. What Is the 'Right' Type of Coverage?

Let's step back and define the two major types of coverage: term and permanent. With term, you have a typically less expensive option that lasts for a specified duration or age -- for example, 10, 20 or 30 years. Term insurance is what I would call "pure insurance": You pay a specified premium and receive a death benefit over a set number of years.

On the other hand, permanent coverage such as whole life or universal life is typically designed to last a lifetime and normally allows you to accumulate "cash value." Cash value is money that's returned or available to the policyholder should they ever decide to surrender the coverage or take out a policy loan.

Both types have a purpose and place, and the policy that works best for you should be based on your financial circumstances and, at the heart, your life insurance needs. In short, the reason or rationale for the coverage provides a good clue as to the "right" type of policy.

3. Does My Child Need Life Insurance?

This is a question packed with emotion. The argument for getting your child covered is all about ensuring future insurability. In other words, get them coverage at a time when they're not likely to have health issues. On the opposite side of the argument would be someone who says, "They don't have anything to protect at this point in their life."

Personally, I like to see kids covered -- first, to offset costs associated with an unthinkable loss; and second, to provide a pathway for coverage in the future. For example, the kids of any service member who signs up for Servicemembers' Group Life Insurance (SGLI) automatically are covered for $10,000. What I mean by "pathway" is the ability for the child, when they grow up, to be able to take over the coverage themselves and potentially increase the protection. Often, a rider on a parent's commercial policy will provide such an option.

4. How Much Is Enough?

At USAA, our basic rule of thumb is that you should have enough coverage to pay off all your debts and replace five years of income. I'd encourage folks to buy coverage based on their individual situation, and that may mean taking the time to use a life insurance needs calculator or talk with a life insurance agent.

5. I Don't Earn Money. Do I Need Coverage?

This is a great question, especially since it's common for the recommended amount of life insurance to be tied to income. Despite that, the answer is probably "yes." Young or old, working or not, every life has a value and should be protected. Even if you don't earn an income in a formal sense, think about all that would have to change if you were not here. A lot of those changes could come with a steep price tag. So, as a rule, I think both spouses, no matter the income they earn, should be covered. If you or your spouse doesn't work outside the home, take a few minutes and try to put an economic value on all the nonworking spouse brings to the family. The number may surprise you!

While you may find different answers to these same questions, the one must-do is to build a protection plan without any gaps.

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