60% of Americans have a life insurance policy. Yet of those insured, 1 in 5 say they do not have enough coverage.
Are you in this boat? Or maybe you fall in the 40% of Americans who don’t have any coverage.
You might be wondering, is life insurance worth it? Read on to find out.
Reasons Why You Might Need Life Insurance
There are various factors that impact who needs life insurance and when to get it. Here are a few reasons why you might opt to get a life insurance policy.
You Have Dependents
If people are counting on your income, it is wise to have life insurance. What would daily life look like if your income was suddenly gone?
Would it affect your loved ones financially as well as emotionally?
Life insurance is first and foremost designed to replace your income. That way your family could stay in your home and continue to pay the bills as when you were alive.
Life insurance companies give better rates to people who are young and have little or no health conditions.
So it may be wise to get life insurance quotes when you are younger and healthier than you might be in the future.
Even if you’re in the best health, though, you never know what could happen tomorrow or next month. Even healthy and young people can suddenly depart this life.
Size of Your Savings
If you die with personal debts, they will likely have to be paid off. Some debts are discharged in the event of your death but others will come out of your estate. For example, credit card debt will have to be paid upon death.
That leaves less money for your loved ones. Of course, there’s also final costs of burial to consider. There are various expenses to allow family members to get closure.
If you don’t have large savings, think about the financial burden that your debts and burial would put on your loved ones. Then ask yourself, is life insurance worth it?
If you don’t have enough savings to pay off these expenses, a life insurance policy is a smart idea.
What Age to Buy Life Insurance
Your age could affect how much life insurance you need. Yet the decision to buy life insurance has nothing to do with age.
As we have already mentioned, there are various factors that impact your need for a life insurance policy.
When you are in your 20s is a great time to get life insurance. Likely your health status is the best it will ever be. You are less likely to be uninsurable now.
Also, you can often lock in a low rate now for the future.
Getting life insurance in your 20s would allow your partner to make the mortgage or housing payments, pay off student loans, cover final expenses as well as childcare expenses if you have children.
If you are in your 30s or 40s, life insurance may seem too expensive. But remember, you can always modify the details.
For example, you might choose a shorter term or less coverage. This way, you still get coverage while still saving money.
If you need life insurance in your 50s or older, make sure you carefully calculate the coverage you need. Take stock of your financial situation. You want to avoid being over-insured so you don’t overpay.
So what is the right amount of coverage you need?
How Much Coverage You Need
Figuring out the right coverage is not as tricky as you might think. Most financial experts recommend getting a policy that is 5-10 times your annual income.
If you have limited savings as well as dependents, you might want to go as high as 15 times your income.
There is also another way to calculate the right coverage.
Start by multiplying your annual income by the number of years you want coverage for. Perhaps that is the number of years until you pay off the mortgage etc.
Then add additional expenses like your children’s post-secondary education costs and burial costs.
Next, subtract your investment and savings amounts. These are funds that could cover the cost of these expenses.
Now you have a specific number for your needs. Use that number to shop around for the lowest quotes.
Putting age aside, if you have people who rely on your income, there’s a good chance your family could benefit from the protection of a life insurance policy.
What Type of Plan to Get?
Now that you know how much coverage you need, you have to figure out what type of plan you want.
There are two main types of life insurance policies. Term and whole life.
Term policies (as the name implies) last for a specific amount of time. These policies expire at the end of the term.
You can buy in various lengths such as 10-year, 20-year, etc.
On the flip side, whole life insurance is a permanent policy. It lasts your entire life.
Of course, there are more types of policies that fall under these categories but as you shop around you will be able to compare these main two types.
So, Is Life Insurance Worth It?
Thanks for reading. So the big question is now, is life insurance worth it?
Simply put, if anyone is depending on your income then yes, you need life insurance. This doesn’t necessarily mean children. Your spouse or parents might struggle to pay for your debts or final costs.
Yes, all this talk of death might be a bit morbid. But, at the end of the day, it’s an important topic you must think about.
Even though life insurance doesn’t benefit you directly, it does give you peace of mind to know your loved ones have security after you are gone.
Be sure to check out our other articles for more informative and interesting content.