Life Insurance
Is Life Insurance Worth It?
There are many answers to the question of why is life insurance important. But by and large, the most important one is ensuring your family’s financial security and peace of mind.If anyone depends on your income, they would most likely struggle if you were to pass away. That’s why life insurance is so important to have. There are different types of life insurance policies, but essentially they all pay cash to your loved ones when you die. Money from life insurance can be used to cover daily living expenses, a mortgage or rent payments, outstanding loans, college tuition and other essential expenses. Life insurance is the best way to ensure that your loved ones would be in a good financial place if you and your income were no longer in the picture.
What Does Life Insurance Cover?
Life insurance covers virtually any type of living expense. Some common expenses include:
Immediate Expenses
- Funeral and burial costs
- Uncovered medical expenses
- Mortgage or rent
- Car loans
- Credit card debt
- Taxes
- Estate settlement costs
Ongoing
Expenses
- Food
- Housing
- Utilities
- Transportation
- Health care and insurance
- Continue a family business
Future
Expenses
- College costs
- Retirement
Do I Need Life Insurance?
If someone depends on you financially, you are most likely someone who needs life insurance.
Life insurance provides cash to your family or loved ones after your death. This cash, known as the death benefit, replaces your income and the many non-paid ways you support your household. Your family can use this cash to pay for expenses like funeral costs, a mortgage, college tuition and more.
Just a few examples of people who often answer “yes” to the question of “Should I get life insurance?” include:
Married or partnered couples
Many partners find it difficult to make ends meet without the other earner’s income in the picture.
Married or partnered couples with kids
In addition to losing one partner’s income, the surviving parent may have to pay for childcare and more without the other parent around to pitch in.
Single parents
As the sole income earner for your family, you’ll want to think about how to replace your child’s only source of financial support.
Stay-at-home parents
From cooking meals to shuttling kids to school to helping with homework, stay-at-home parents perform many critical responsibilities that would be costly to outsource.
Empty nesters
Many surviving partners would not be able to maintain the lifestyle they worked so hard to achieve without life insurance.
Retirees
Depending on the size of your estate, your heirs could be hit with an estate-tax rate of up to 45%. Fortunately, cash from a life insurance policy gives heirs access to tax-free money to pay for immediate costs and more.
Business owners
Life insurance can help your business in many ways if you, a fellow owner or a key employee were to pass away
How Much Life Insurance Do I Need?
The amount of life insurance to buy depends on who you want to protect financially and for how long.
For a general idea, consider the following:
For a general idea, consider the following:
1.
Add up the immediate, ongoing and future expenses your family or loved ones would incur if you were to pass away.
That could mean everything from funeral costs to rent or mortgage to college tuition.
That could mean everything from funeral costs to rent or mortgage to college tuition.
2.
Add up the financial resources your loved ones already have.
That could mean a spouse’s income and life insurance that’s already in place.
That could mean a spouse’s income and life insurance that’s already in place.
3.
Subtract your financial resources from the anticipated expenses.
The difference between the two numbers is the approximate life insurance to buy.
The difference between the two numbers is the approximate life insurance to buy.
As an easy rule of thumb, experts recommend having life insurance that equals between 10 to 15 times your gross income. But many people need even more than that. To get a more accurate idea of how much life insurance to buy, check out the Insurance Needs Calculator by Life Happens, a non-profit insurance education site.
There Are So Many Types of Life Insurance,
Which One Do I Need?
Explore the different life insurance options to find the best fit for your needs and financial goals.
Term Life
Affordable protection for a set period.
Whole Life
Lifelong coverage with cash value growth.
Universal Life
Flexible coverage with adjustable benefits.