Do I need to buy life insurance?
Yes. Life insurance is a financial provision you make for those you love which provides cash to them should you die. Life insurance will enable your family to grieve through the trauma of losing you, without the added burden of crushing bills and loss of your financial support. Even if you are not the main financial provider, life insurance can be used to pay funeral and burial costs, pay off debts, and provide for your spouse and children through an undoubtedly difficult time.
How much life insurance is enough?
How much money is enough for your family to survive on if they should lose you? This is a great question to ask your local life insurance agent. They can help you balance the amount you would like to provide with amount of premium you can afford. A general rule is 10 times your annual income. If you are the main provider for your family, you’ll need to determine with your advisor what amount will cover your family’s needs and how long they will need this support with the sudden loss of your income.
Types of Insurance
There are two categories of insurance - Whole Life and Term Life.
Whole life is more expensive and provides a guaranteed death benefit to your beneficiaries through your entire life as long as you pay your premium. Term life is less expensive and provides a death benefit as long as you pay your premium for a specific amount of time such as 5, 10, 20 or 30 years.
Whole life has two parts: 1) The Face Amount, which is the death benefit and 2) The Cash Value which builds over time and can be borrowed against, or received as a payout if the policy is canceled before death.
There are many variants of these two types of insurance so ask your agent to explain all of your options. For example: Variable Whole Life will invest a portion of your premium which involves certain risks and rewards. Universal Whole Life provides flexibility in setting premiums and death benefits. Ask your advisor or life agent which one would be best for you and your family.
In conclusion: It’s uncomfortable to think about dying and easy to put off buying life insurance, but once it’s done, you’ll have a peace of mind knowing that your family is covered and you did the right thing.