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.