3 Reasons Why You Might Need Life Insurance?

If you don’t already have life insurance, it’s time to start asking yourself if you need to get it. And, if you already have some, then it’s time to make sure it’s enough.

What Does Life Insurance Do for Me?

The most widely recognized benefit to life insurance is a cash payout upon the death of the insured. What that means is, when you die while covered, the life insurance company will pay a lump sum to whoever you’ve listed as beneficiaries. This is true for both term and whole life insurance.

However, whole life goes one step further. Not only is your policy set to pay in case of your death, but you can also borrow against the cash value it builds while you’re still living. So, while whole life is generally much more expensive than term, it has a lot of additional value that term life policies just don’t offer.

How Do I Know If I Need Life Insurance?

Determining whether or not you should include life insurance as part of your estate planning can seem like a difficult decision, but it really boils down to a few questions you should ask yourself.

  1. Do you have any unsecured debt?
  2. Do you owe money on your house?
  3. Do you have any dependents?

If you answered yes to any of those three questions, there’s a good chance you could benefit from life insurance.

After all, you have three real options with estate planning when you owe money or have dependents. Either you pay it out of your estate; your family is left with the burden of paying if your estate is not enough to cover expenses; or you have something like life insurance in place to cushion your estate, cover what you owe and the expense of dependents.

If your estate alone is not enough to cover bills and ongoing expenses, you should consider at least a term life policy.

How Much Life Insurance Do I Need?

It isn’t hard to figure out how much life insurance you should apply for if you are only looking to cover the basic necessities.

You’ll need to determine what the annual living expenses for your family are and how much of that is your contribution; how much debt you owe; and what expenses will come with your death, like funeral costs. There are also calculators online to help you like this one.

Life Insurance Doesn’t Have to Be Scary, Expensive, or Even Forever

You can take control by opting for a policy that suits your estate needs, your timelines, and your budget. As you age you’ll most likely not only build on your wealth, but also pay down expenses and debts, making life insurance less important. At that point you can reassess your estate needs and cancel your policy if you no longer need it.

Life insurance doesn’t always get the credit it deserves. A life policy can be a real asset to your estate plan and; in a broader social sense, helps to level the playing field between the wealthy, and the not wealthy by closing the financial gap your death leaves behind for your family.