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When trying to wrap your head around life insurance, one good place to start is to look at the groups that historically have utilized life insurance. There are also a few groups that usually wouldn’t—but you might see some surprise reasons why they would want to buy life insurance as well.
By far the most common and obvious for life insurance is parents. When you have one or more children, you have others who depend on you and making sure they can be taken care of if anything happens to you is an absolute must. Term life insurance is good for parents on a budget, while permanent life insurance will make sure children are cared for not just in their youth but into young adulthood and beyond.
Any married couple is likely going to depend on one another for their lives together. This can especially be true of any long-term debts—like a mortgage—that you are both on the hook for. By buying a dependable life insurance policy, you can take steps so that your spouse won’t be burdened by your joint debt and any other expenses that may arise.
As a retiree, you may be nearing some long-standing goals for your savings and not have the burden of supporting your children anymore. But it’s still worth wondering just how prepared you are and if you have a spouse that you want to thrive for many years after your passing at the same standard of living. Plus, many retirees may still want to be able to support their adult children, or their grandchildren, for years to come.
Often the most unlikely candidate for life insurance, young professionals without any spouse or children may not see the need for life insurance. More often than not, they are correct.
But if you are a young professional with student debt, a life insurance policy can make sure others are saddled with that debt in case something unexpected happens. Young professional could also have another incentive to get life insurance before they are married or have children—getting life insurance while you are younger and healthier can help you lock in a low premium rate that could save you money or headaches when you are older.
Life insurance can be intimidating for many. There are a lot of policies available and how much you need to know about life insurance depends on a variety of factors in your life. Before getting into the fine details of life insurance, here are four questions to ask.
There are a few reasons why you might not need life insurance. If you are a young professional without dependents in your life and no debt that could impact your family, then there’s a chance you don’t need life insurance, or would just want a minimal amount to cover any funeral arrangements. This level of coverage could be offered from your employer.
But if you are just married, starting a family, or retired and free of any dependents, then life insurance is a very good idea. You want to take the necessary steps to make sure that those close to you are taken care if in case the unexpected occurs.
When answering this question, you’ll want to take a comprehensive look at all your personal financial information and decide what your family needs to meet future obligations and maintain the same quality of life in the event of a death. This can range from person to person, but generally it is good to begin by having a policy that covers at least 10 times your gross annual income. There are other factors you can consider from there, or you can always increase your coverage later.
This can include a long list of questions to consider, but essentially, you’ll want to determine the length of time you will have others depending on you—or how long it will take to pay of certain debts. When do you think you’ll be able to pay off your mortgage? When do you think your children will reach financial independence? Answering these questions will tell you just how long your life insurance term should be.
There are two major types of life insurance you can buy: term and permanent. For those who are more budget conscious, term life insurance gives you good coverage at a low premium for a certain amount of time. Permanent life insurance gives you lifelong protection and lets you accumulate tax-deferred cash values.
Some people think of life insurance as a “once and done” checklist item in life. They imagine that once you’ve dealt with the delicate conversations about life insurance and made your decisions that you’ll never have to worry about it again.
While that may hold true in some cases, more often than not it doesn’t work like that. As you encounter changes in your life, you’ll almost certainly need to reconsider your current level of life insurance coverage. But what kind of factors would spur you to modify your life insurance coverage? We’ve collected a few of the most common reasons.
Any time your family grows, you’ll likely want to reexamine your life insurance coverage to make sure you have enough. The most common reason you may expand coverage, or possibly get it in the first place, is when you get married or have a child. Bringing someone else into your life makes a good life insurance policy an absolute must—you wouldn’t want to leave them with a financial burden should the unthinkable happen.
There are other ways your family can grow and you should consider expanding your coverage. For example, you could have more children, or an aging parent could move into your household. These extra dependents are a very good reason to look at your current coverage and adjust it if you think it’s falling short.
Any time your income levels change you’ll want to see if you have enough life insurance coverage. If you have enjoyed a pay increase over the years, it’s a great time to look back at your life insurance policy—you may have gotten less coverage when you were making less and use your higher pay to increase your coverage to better manage your future.
There are other adjustments you may want to take into consider: maybe you partner has stopped working to spend time with your children or focus on other pursuits. If that’s the case, you would be smart to increase your coverage to make sure you are meeting the necessary financial expectations.
There are a wide range of other life events or changes that can inspire you to get more life insurance coverage. You might have a family member who has been diagnosed with an illness or requires long-term care, requiring you to make sure your policy can cover these other expenses. You could find that your standard work policy is no longer enough and need to make a change. The key is to be aware of what could impact your life insurance beneficiaries and be prepared to make increases if the circumstances call for it.