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Here's how to financially prepare your family for the worst-case scenario

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What you need to know about life insurance

If you're going to put in all the work to save for your family's future, you should protect it as well.

Life insurance is a key component of every solid financial plan, yet it's often the last thing most people want to think about.

Over a third of adults who were asked by personal finance site ValuePenguin did not have a life insurance policy.

More than 4 in 10 of those who went uninsured believed it was too expensive to buy coverage, the survey found. ValuePenguin polled 1,029 people online in May 2019.

"The reality is that most of us should get life insurance if we have people who count on us, who we love and who we want to make sure are protected in case we're no longer here," said Winnie Sun, managing director of Sun Group Wealth Partners in Irvine, California.

You may want to work with a financial planner so that you get your insurance coverage just right, but here are three steps that will take you in the right direction.

1. Find the right amount of coverage

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A general rule of thumb is to buy enough life insurance to cover 10 times to 20 times your annual income in the event you or your spouse were to die, said Sun.

Chances are that if you have life insurance at your workplace, it's not going to be enough to meet all of your family's needs if you were to die.

Further, workplace policies often aren't portable. If you parted ways with your employer, you would most likely lose coverage.

This means it makes the most sense to shop for a policy outside of your employer; often you can get more generous death benefits for less money.

For example, a healthy 30-year-old woman can buy $1 million of coverage for a 20-year term starting at $25 a month, according to Policygenius.com.

Consider working with a financial planner to make sure your insurance doesn't fall short of your needs.

2. Look at your expenses

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Fine tune the amount of coverage you need by drawing up a spreadsheet of the expenses you have to have covered.

"Maybe you want to make sure your house is paid off and that the mortgage bill goes away," said Sun. "Maybe your car loan gets paid off."

Talk with your family to get an idea of what your goals might be. For instance, you might want to have enough money to send your child to college with no debt.

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To that end, Sun's own life insurance plans account for the cost of paying for her child's wedding.

"Have an active discussion with your family so that they know what you're thinking, and so that they know what you're contributing toward them and their future," said Sun.

3. Be cost conscious

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Be aware of the different types of insurance available, as well as the cost.

A term policy might make the most sense for workers who want to replace their income if they were to pass away.

This is the cheapest coverage available when you're young and healthy, but your monthly costs will rise as you get older.

Further, you lose your policy once the term – generally 20 years or 30 years – is up.

Permanent life insurance, which comes with a savings account known as cash value, might be better suited for complex planning needs. That would include estate planning.

It's called "permanent" insurance because the coverage stays in force as long as you pay the premiums – which are going to be much higher than what you'd pay for term coverage.

For example, a healthy 30-year-old man would pay $122 a month for $100,000 of whole life insurance coverage, according to Policygenius.com.

"You don't want to over-insure yourself, which can wreak havoc on your existing budget, but you also don't want to underinsure, especially if you have people who are depending on you," Sun said.

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