Do I need Life Insurance?
This question is often considered and researched, but rarely asked. The honest answer is, maybe. That being said. if you think you may need or want life insurance, then the answer is probably yes. If anyone is dependent on you, and would suffer financially with you gone, then the answer is definitely yes. However, if you do not have any minor children, or a spouse that is dependent on your income, then you may not need life insurance.
When thinking if you need life insurance or not, you can think of the Long Term & Short Term needs of your potential beneficiaries. How many people depend on your income? How much money would your dependents need for living expenses? How long would it take for your dependents to become self-sufficient? What assets will be available to take care of your dependent’s immediate financial needs? Will you owe any estate taxes?
Another reason for Life insurance is to protect your business. If you own a business do you want it to continue if something were to happen to you, or one of your key employees? Do you have a business partner and worry that you might lose the business if something were to happen to them? If you answer yes to any of these questions than you should review your life insurance options.
Below is a short guide to who needs life insurance and what kind of policy likely works best for each situation:
|
How life Insurance can help |
Best Option |
|
Primary Breadwinner |
|
| Life Insurance can provide “income replacement” so that your family can continue to pay everyday expenses | Term Life insurance can cover your salary during your working years |
|
Stay-at-home Parent |
|
| Life Insurance would cover the cost of paying for services that parent now does for “free”, such as child care, etc. | Term Life Insurance can cover the years your children are young |
|
Divorced Parent |
|
| A policy could cover the support payments that a divorced parent makes | Term Life insurance can cover the years of support payments |
|
Homeowners with a Mortgage |
|
| A policy can cover the mortgage payments, so your family does not have to move if you were to die | Term Life insurance can match the years of a mortgage |
|
High Net Worth Individual |
|
| Life insurance can provide funds to pay estate taxes, or make the inheritance full after paying for taxes | Permanent life insurance is best of those with estate tax concerns |
|
Someone who wants to provide an inheritance |
|
| Life insurance is a way to provide a inheritance to your children even if you did not build up wealth for yourself | Permanent life insurance will pay money to your heirs, no matter when you die |
|
Business Owner |
|
| Life insurance can pay off business debts, help to fund buy/sell agreements and even protect your business from the death of a key employee | Term Life or Permanent life depending on the issue to be solved |
|
People concerned about paying for the own funeral |
|
| Small Life insurance policies can pay for your funeral expenses | A type of permanent policy called Final Expense is designed exactly for this need. |