Who needs it?
If someone depends on you financially, you need life insurance. Find your particular situation below to find out how life insurance fits into your overall financial plan.
- Family Obligations
Married couples share financial obligations. That’s why it’s important for each spouse to have their own life insurance policy. In the event of a spouse’s death, a life insurance policy would allow the surviving spouse to cover shared expenses. In addition, if you’re a married couple planning on having children, it’s a good idea to buy the life insurance policy before becoming pregnant because health complications can affect your life insurance rate.
It’s not only important that your spouse is protected, but it’s important that your children will be able to continue living the lifestyle they’re used to. Consider their financial needs, such as living expenses, college tuition and marriage.
Single parents serve as the primary caregiver, breadwinner, cook, chauffer, entertainer and more. With so much responsibility and no spouse to share it with, there’s no question single parents need life insurance.
Stay-at-home parents make very large financial contributions to their families. For example, things like childcare, transportation, cleaning, cooking and household management all cost money. If you are a stay-at-home parent, it is important to have a life insurance policy that is sufficient enough to cover the cost of these responsibilities if you are no longer around.
If you have an estate, your heirs could be hit with a large estate tax payment after you die. The proceeds of a life insurance policy are usually paid out immediately, allowing your heirs to cover the estate tax and other final expenses.
- Small Business Owner
Life insurance can protect your small business. If you, a partner or other key employee died, a life insurance policy would cover the business’ financial loss. Life insurance for businesses can be structured to fund a “buy-sell” agreement, where the surviving partners would have the funds to buy the company interests at a previously agreed upon price, or “key person insurance,” which provides the owners with the proceeds needed to hire a replacement.
Single people need life insurance too. For example, some singles provide financial assistance for ill parents. Some people are carrying significant debt, like student loans, that they would not want to leave their co-signers with. Also, consider buying a life insurance policy while you’re young and healthy that will guarantee your insurability for life.
How much do I need?
Life insurance 101 experts suggest buying a life insurance policy that is 10 to 20 times your annual salary, but your annual salary isn’t the only important factor in determining your life insurance needs. You need to consider how much money will be enough to protect your family when you’re no longer around.
Ask yourself the following two questions.
- How much money will my family need to fund final expenses, such as the cost of my funeral and outstanding debts?
- How much money will my family need to continue living the lifestyle they’re used to, pay off the mortgage and fund future expenses?