1- Are you married?
2- Do you have/plan on having kids?
3- Are you a divorced parent paying child support/alimony, or a single parent?
4- Are you a business owner with a succession plan?
5- Do you provide support for an aging or special needs family member?
The purpose of life insurance is to cover any costs that people who are financially dependent on you would incur at the time of your death. As far as who needs life insurance, in general, if there is anyone in your life who will be financially liable after your death, the need for life insurance is there.
Let’s begin with the basics and see who falls into the “buckets” of life insurance need:
1. Term life insurance has a specified period of coverage, up to 30-years and basically “times out.” If you are still alive at the end of the term, you can choose to renew it or convert it to a permanent policy that will last for your lifetime.
2. Permanent life insurance a/k/a cash value life covers you during your lifetime, 100+ years of age. It is sometimes referred to as an investment account because it accumulates value the longer you pay into it and becomes almost like a savings account.
Once you’ve built it up to its max face value you can borrow on that money to cover other needs. But its growth and value come at a price— 5-10 times higher premiums than term coverage, which is why it is generally reserved for higher income people.
Now that you have a pretty good idea of what it is, this sketch exemplifying so-called “buckets” of need will show if you fall into these categories and will likely need life insurance coverage.
In general, the younger you are, the lower your life insurance premiums will be when you purchase a policy. The longer you wait, the more expensive it gets and the harder it is to qualify.
It is important to assess both the short-term and long-term financial needs of the family should you die. Short-term needs would include funeral expenses, potential relocating costs, and any debts you’ve accrued that might need to be paid in full.
Your family’s longer-term financial needs are dependent on a few other things. How many people are depending on you for income? What is the cost of living for those people? How long would they need coverage before becoming financially independent?
The younger you are, the lower your life insurance premiums will be. The longer you wait, the more expensive it gets and the harder it is to qualify.
Think about college tuition, child care, and continuing support for other family members. If you are a business owner, consider how your death would affect your partners and have a succession plan in place to protect them in the event of your untimely death.
A life insurance policy can be beneficial for a number of reasons. The biggest reason is that the death benefit, what your beneficiaries receive when you die, is completely tax-deferred. That means all of the money will be in their hands and not in the hands of the government. Other benefits include:
1) Financial security and comfort for your family in the event of your untimely death
2) Protection for a dual-income household
3) Covering final expenses, like funeral costs and credit card debt
4) Paying off a mortgage
5) Covering college tuition for current or future children.
6) Stability and continuity for your business
7) Providing continued support for a disabled or aging family member
8) If you buy a permanent life insurance policy, you’ll have the added benefit of an accessible cash value account that grows over time tax-free, providing you with a potential “living benefit” along with your death benefit.
Life insurance can still be put to good use, even if no one is financially dependent on you! You can name a charity or non-profit you support as your beneficiary, leaving a lifelong legacy of support for the institutions that matter most to you.
>> Read more: Understand life insurance beneficiaries
We hope you found our article, “Who Needs Life Insurance? And Why Should You Get It Now”, very informative and useful. If you have any other question related to life insurance, please leave a comment below. You can even give us a call at (800) 521-7873 and our life insurance advisors will be happy to help you out.
The time is now…take action and compare life insurance quotes today to start protecting what matters most.