Guest Post by Financial Adviser Shanna Tingom of Heritage Financial Strategies

How much life insurance coverage do you have? If you’re like many of my clients, you’re either way over-insured or way underinsured. And neither is a good thing.

Life insurance can be confusing, so let’s first talk about why you’d need a life insurance policy. First, for income replacement. If it takes you and your spouse to cover household expenses, life insurance is worth considering. Second, making sure long-term goals like paying kids’ college and paying off your house are fulfilled in the event of your death or that of your spouse.

What do you need to look for when choosing a life insurance policy?

The type of insurance, premium, amount of coverage, employer-sponsored or not, and insurance company rating are all considerations.

Term vs. Perm Insurance

Term insurance is only for a certain period of time (10, 20, or 30 years) whereas perm insurance is ongoing.

  • You’d purchase a term insurance policy for the years when you need the income replaced, such as when the kids are in school or until the house is paid off.
  • Permanent life insurance (also called perm, variable, whole, or universal) is typically appropriate for older adults as a financial planning tool, especially if they don’t qualify for traditional tax-deferred plans or have maxed out their Roth IRA.

Life Insurance Premium

Your premium, whether term or perm, is based on the amount of coverage, length of coverage, your health, risk factors, and riders. For example, a construction worker is a higher risk insured than an office worker. A rider example would be your children having coverage.

If you’re a business owner, consider life insurance to cover business expenses like paying your staff, rent, and utilities until your successor is named, trained, and is running the company.

Employer-Sponsored vs. Portable Policy

Even if you have life insurance through your employer, it’s a good idea to have a non-sponsored or portable policy as well. Employer-sponsored life insurance is typically not portable, meaning that if you leave your job, you are no longer covered. Having a portable life insurance plan in addition to the employer plan will keep your family protected even if you leave your job. Ideally, the total for all life insurance policies should be 1-5 times your salary.

Insurance Company Ratings

You can check insurance company ratings in the Financial Strengths Ratings Guide from AM Best, the industry standard for insurance company ratings. Each company is rated A through D, much like school grades, indicating their financial strength. The higher the rating, the less likely they are to have trouble paying claims or going out of business.

Term insurance is a highly competitive industry. Without many variations in terms of coverage, it’s important to find a company rated A or B. If you’re young and in good health, there’s no reason to go to a substandard company. If you have health issues, I recommend talking to an insurance professional before purchasing life insurance.


shannaIf you’re interested in learning more about life insurance or would like your coverage reviewed, please call Heritage Financial Strategies to schedule an appointment. Shanna Tingom, AAMS® is an independent financial professional and the founder of Heritage Financial Strategies. Her specialty is working with female entrepreneurs, business leaders, and individuals experiencing life transitions. Shanna has built a career out of helping others take charge of their financial future. She is an active member of the Gilbert Small Business Alliance and Gilbert Chamber of Commerce. She also enjoys traveling with her husband, Eric, and spending time with her two Cavalier King Charles Spaniels.