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Whether or not you need life insurance depends on your family circumstances, financial obligations, and life stage.
Insurance is probably not essential for people whose families can meet their financial obligations without a breadwinner nearby. But for those with small nest eggs and small children, it may be essential.
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“Life insurance is the cornerstone of financial security,” said Brittany Parisi, life insurance agent at digital life insurer Bestow. Knowing you have a plan in place should something happen gives you valuable peace of mind.”
Read on to determine if life insurance is in your financial portfolio and how much it costs.
Question matters
To determine if life insurance is right for you, ask yourself the following questions.
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Who Relies on My Income?
“If there are people in your life who depend on you for their financial well-being, you may need life insurance,” Parisi said. It happens at the biggest milestones in life, such as the birth of a child or starting a business.”
But life insurance isn’t just for married couples and those with children, says Acquania Escarne, a financial coach who runs The Purpose of Money website.
“If someone depends on you for income, you should get life insurance,” she said. “That could include your spouse, children, siblings and even parents. Your life insurance will pay off your mortgage, fund your child’s college education, and ensure that your spouse and children live without you for the next five to 10 years. We can provide the income you need.
Faisa Stafford The CEO of the nonprofit Life Happens said it’s important to consider what happens when parents’ financial and other contributions are removed from the family.
“It’s estimated to cost $233,610 to raise a child to age 18. That amount only increases if you plan to contribute to your child’s college education,” she said. rice field. “Statistics like this underscore how important it is for parents to consider life insurance.
“This is the same for working parents as it is for stay-at-home parents. Replacing outstanding family contributions is expensive. And we can’t forget single parents who are raising their families on their own. They have a particularly critical need for financial protection in the form of life insurance.”
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What if I own a business?
“Business owners should definitely have life insurance,” said Eskahn. “One, it is required for some (Small Business Administration) loans. I can do it.
“It also saves the family from having to take over the business if they don’t want to run it. You can help your business partners by giving.”
What do you do when you retire?
No matter how old you are, if you are on either end of the financial spectrum, you may need insurance.
“Surviving partners often have to make ends meet with less Social Security and pension support. They may also need to cover unexpected funeral expenses,” Stafford said. “This can seriously hamper their finances. Plus, heirs may have to pay up to 45% inheritance tax if they plan to leave money to their heirs.” In most cases, federal tax exempt life insurance can be very helpful in any of these situations.”
Create a strategy
The amount and type of insurance you purchase will depend on your needs and age. The younger you take out insurance, the cheaper your premiums will be. Plus, while you’re young and healthy, you can qualify for insurance that you may not be able to afford later.
According to Guy Clanton, senior financial planner and shareholder at Truepoint Wealth Counsel, the insurance provided through employment is sufficient when you’re just starting out.
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“People who are new to work, especially unmarried people, don’t need life insurance,” he said. “At this point in your life, you should be focusing on retirement savings, building a healthy emergency/home loan down payment, and/or paying off student debt. As a member, we will provide free group term life insurance equal to one or two times your salary.”
But things change when a spouse or partner and children come along, as they want to make sure they have enough money for their living expenses and education. That’s where term life insurance comes in, says Parisi.
“For many people, term life insurance is the best choice because it offers robust financial protection at a budget-friendly price,” she said. , an affordable and straightforward type of life insurance that you choose for the period that helps provide a financial safety net for your family for the time they need it most, for example, until your children reach the age of majority or until your mortgage is paid off. To do.”
Joe Calvetti, CPA founder and founder of Still River Financial Planning, said buying multiple term policies with different expiration dates is a good strategy.
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“Your life insurance needs to peak when you have your first child, save, and taper off as your children become more independent, so grading a term life policy is an effective strategy. It may become
For example, if you have a mortgage and need to raise young children, you may need $750,000 worth of insurance. Instead of purchasing one 30-year term policy, you can purchase three $250,000 policies.
How much does term insurance cost? According to insurance giant Progressive, a $250,000 term policy over 10 years costs $13.48 a month for a 30-year-old man, $16.31 a month for a 40-year-old man, $32.84 a month for a 50-year-old man, and $32.84 a month for a 60-year-old man. $74.82. age man. Women at each age level cost less.
“For term life insurance, a simple rule of thumb is to buy life insurance for five to ten times your annual income,” says Parisi. “If you have a lot of debt, you may want to cap your coverage. If you have less, you may need a little less coverage. You have to choose how long the term lasts.For example, if you just bought a house, you may need 30 years of insurance to ensure that your coverage continues for the duration of your mortgage.”
It’s worth asking yourself if you have enough financial resources for your family in the event of an unexpected death. If not, life insurance is considered.
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