Life FAQ - One Nevada Credit Union | Serving Las Vegas, Pahrump and Reno, Nevada - Loans, Checking, Savings, Investments and Insurance

Life Insurance

Frequently Asked Questions

How much life insurance should an individual own?

Rule of thumb suggests an amount of life insurance equal to 6-8 times annual earnings. However, many factors should be taken into account when determining the right amount of life insurance for you and your family.

Important factors include:

  • Income sources (and amounts) other than salary/earnings
  • Whether or not you’re married and, if so, what your spouse’s earning capacity is
  • The number of individuals who are financially dependent upon you
  • The amount of death benefits payable from Social Security and from an employer-sponsored life insurance plan
  • Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need, etc.)

Calculating the correct amount of life insurance to buy is not as simple as it appears. We recommend contacting us for help determining the right amount of coverage. As independent agents, we are unbiased advisors who will help you avoid buying too much, show you appropriate optional coverage for your need, and recommend a company that will best serve your interests.

What about purchasing life insurance on a spouse and/or children?

In certain circumstances, it may be advisable to purchase life insurance on children; generally, however, such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s).

It’s of utmost importance that the income-earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance. This should be done before contemplating the purchase of life insurance on children or on a non-wage-earning spouse. Life insurance on a non-wage-earning spouse is often recommended for the purpose of paying for household services lost due to this individual’s death. In a dual-earning household, it’s important to protect the income-earning capacity of both spouses.

Should term insurance or cash value life insurance be purchased?

This is a difficult question which can only be answered depending on your personal circumstances.

First, recognize that in any life insurance purchasing decision, two questions must be answered:

  1. How much life insurance should I buy?

  2. What type of life insurance policy should I buy?

Question #1 should always be resolved first. For example, the amount of life insurance that you need may be so large that the only way you can be afford it is through the purchase of term insurance, since term insurance has a lower premium.

If your ability to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the second question: what type of policy to buy. Important factors affecting this decision include your income tax bracket, whether the need for life insurance is short-term or long-term (e.g., 20 years or longer), and the rate of return on alternative investments possessing similar risk.

How does mortgage protection term insurance differ from other types of term life insurance?

The face amount under mortgage protection term insurance decreases over time, consistent with the projected annual decreases in the outstanding balance of a mortgage loan. Mortgage protection policies are generally available to cover a range of mortgage repayment periods, e.g., 15, 20, 25, or 30 years. Although the face amount decreases over time, the premium usually remains the same. Further, the premium payment period often is shorter than the maximum period of insurance coverage. For example, a 20-year mortgage protection policy might require that level premiums be paid over the first 17 years.

Can an existing life insurance policy be used to provide for the repayment of an outstanding mortgage loan?

Yes. An existing policy, either term or cash-value life insurance, can be used for many purposes, including paying off an outstanding mortgage loan balance in the event of the insured’s death. Although a lender may offer a mortgage protection term policy to you, the lender rarely requires it.

Credit life insurance is frequently recommended in conjunction with the taking out of an installment loan when purchasing expensive appliances or a new car, or for debt consolidation.

Products are not NCUA/NCUSIF insured and are not guaranteed or obligations of One Nevada Credit Union. Property, casualty and life insurance offered through One Nevada Insurance Services, LLC.
IMPORTANT DISCLOSURE: To offer you an accurate quote, we may need to collect information from consumer reporting agencies, such as driving record, claims and credit history reports. Future reports may be used to update or renew your insurance.

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