As we plan for the future, we know that life is full of uncertainties, and it is necessary to have backup plans and insurance coverage in case things don’t go as expected. Life insurance is an essential part of financial planning which can provide for families in the event of the death of a family member. In certain cases, even individuals with no immediate financial dependents should have life insurance to cover co-signors of student loans and final expenses since funerals in the United States can cost in excess of $10,000, creating hardship for surviving family members.
So why buy life insurance? The two reasons to buy life insurance are: to provide income replacement for your financial dependents; and to cover large debts your family may not be able to pay off after your passing.
Who Needs Life Insurance?
Ideally, everyone should have life insurance, whether it is a small death benefit to cover final expenses or a policy with a large death benefit to provide financial security for surviving dependents who will need to cover mortgage payments, auto/personal/business loans, credit card expenses, medical bills, or tuition and education costs.
No one wants to mull their own death, or the death of a loved one, but life insurance can provide the necessary financial support during times of grief and help to alleviate some of the stress suffered by those left behind. The best life insurance policy offers peace of mind to every member of the family. The simplest test to determine if you need life insurance is: does anyone financially depend on you? If the answer is yes, you most likely need life insurance. Even if you are a stay-at-home parent you should also have a life insurance policy in your name.
How Much Life Insurance Do You Need?
The types of life insurance an individual needs depends on his circumstances at the time the policy is purchased. Older people who are retiring soon or senior citizens with no dependents may choose to purchase a policy with a small death benefit to cover their funeral and burial expenses or to leave a small gift or inheritance for family members. Wealthy families may even consider a second-to-die life insurance policy to help beneficiaries pay for estate taxes and avoid liquidating investments at a discount.
Younger adults or families should determine how much money would be required to sustain their family if they were to die. Your death benefit amount depends on your current assets versus liabilities, such as your savings and checking accounts, personal investment and retirement accounts, pension and other assets versus your outstanding debts.
When calculating how much life insurance you need, some experts recommend you buy life insurance with a death benefit equivalent to about 5 to 10 times your annual salary but this method is not consistent for everyone’s financial situation. For example, would a couple with a household income of $50,000 and no home or debts require the same amount of coverage as a family of 4 with the same income, a home, and existing credit card debt?
Fortunately, life insurance policies can be reviewed and adjusted when they are renewed, allowing you to increase or decrease your death benefit in case your income, assets, and debts change.
What Kind of Life Insurance Is Best?
There are many different types of life insurance – the best policy will depend on the individual’s circumstances. Cheap term life insurance is the most common type of coverage chosen because of its flexibility and low cost. Small whole life insurance coverage can offer a death benefit for beneficiaries while providing the gift of a cash value.
Others may consider the investment options of universal life insurance and decide they want a permanent policy that accrues a cash value. The choice for families may be dependent on their income, the policy they can afford and how the policy complements their overall financial plan.
How To Buy Life Insurance
Thanks to the internet, buying life insurance is easier and cheaper than ever before. Comparing life insurance online offers the best discounts and rates because consumers can forego the sales commissions received by agents, brokers, and advisors. You can ask for as many online life insurance quotes as you like and compare coverage options, rates, companies, and types of policies until you find the best policy to fit your budget.
As the primary blogger at MyLifeInsuranceQuotes123.com, Gary Dek focuses on providing resourceful, unbiased life insurance information to help consumers find the best and cheapest coverage.
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