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Do I Need Life Insurance ?

If there is someone in your life who is dependent on you financially, then you probably need life insurance. Advisor Haley Tolitsky answers your questions regarding the amount, applying to get coverage, and many more.

September was the month for awareness of life insurance; however, it’s never too late to safeguard your loved ones before the closing this year. The thought of death isn’t simple or enjoyable; however, it’s important. One of the most common misconceptions, particularly for younger people, says that one doesn’t require life insurance because it’s too costly. If you have someone in your life who relies on you financially, then you probably need life insurance. The great news is that it’s probably less expensive than you imagine.

This article focuses on the term life insurance policy only. Beware of salespeople who attempt to sell you on total and permanent insurance (life insurance that has a cash value) since this type of insurance is usually very costly and is not needed by most people. Always do your research!

How can I tell whether I’m in need of life insurance?

Term life insurance gives the cash death tax-free (cash) to your designated beneficiary(ies) upon your passing in death. It could be your children, spouse, or aging parents. If one of your family members is dependent on your earnings and you can support them, you require an insurance policy to safeguard them. If you should pass and die, the benefits paid to your beneficiary would be used to pay for the immediate and future costs. Other indicators that you should consider the life insurance you need include

Suppose you have children who are minors. Life insurance may help with the costs of their children, including school fees, food, and daycare. Even though stay-at-home parents may not be earning a salary, think about the cost of housework and childcare needs that would be expensive to cover when they aren’t there.

You are in the burden of debt. Joint owners and cosigners on your student loans, mortgage, and loans will be accountable for the debt you owe should you pass away.

To pay for the expenses of funeral expenses. This relieves the burden of your family members.

You operate a company with an employee or partner.

What amount of insurance should I get?

Suppose you are applying to purchase life insurance. In that case, you’ll have to select the number of death benefits the beneficiary will receive and the period, a.k.a. the period during which the policy will be in force (often 10 20, 20 or 30-years). To decide on the right death benefit, think about how much your loved ones will require to pay for their daily expenses and the duration of the policy. Consider any outstanding debts that will have to be paid off, for example, your mortgage, student loans from private institutions, credit cards, and auto loans. If you have kids be sure to consider the cost of childcare and college education.

When choosing the duration, take into consideration how long your family might require the entire death benefit. Many people choose to run until their children have graduated from college and can support their own needs, have had their mortgage paid off, or their surviving spouse can make ends meet with savings and investment.

It is also possible to “stack” Life insurance, which means you buy two policies: one that has a more death benefit and a shorter duration to pay for your current obligations and lifestyle and a second one with a lower death benefit but with a longer-term, to secure the low cost. See this illustration:

How do I apply?

It is usually a simple and quick procedure applying in life insurance. You can apply by completing an online application or through a life insurance agent. The application form requires your medical history. You may also be required to take a brief medical exam. After that, underwriting will review your application, which is where the insurer reviews your application. Once you are approved, you be required to sign the policy and pay the cost, and the policy will go into effect.

Helpful Tips

Remember that the healthier and younger you’re, the less expensive the life insurance policy you purchase will cost. After the term is over and the policy ceases to be more valid. However, if you require life insurance, you’ll be required to apply again following your age and health condition and be charged a greater annual cost. It’s a good idea to secure your low-cost premium for a long time (20 or 30 to 40 years) as long as you’re healthy and young.

A general norm of thumb is that your annual earnings are sufficient for life insurance between six and ten times. But do not forget about your children or debt. Utilize an insurance calculator to determine the amount of insurance you need to apply to.

Always list a contingent beneficiary. The death benefit will go to the contingent beneficiary if your primary beneficiary dies. Check your beneficiaries every year and make sure they can override your will! One of the worst things you’d like to happen is going to the wrong people for your death benefit.

A lot of employers offer group term coverage for life as a company benefit. This is great because it is usually low-cost or even free. However, some drawbacks could be a problem, such as insufficient coverage and possibly losing your coverage should you decide to leave your employer and the fact that the benefit in case of death can be tax-deductible for the beneficiary. It is recommended to accept the low-cost or free insurance that your employer offers; however; you should consider buying an individual term life insurance policy for added security.

Check around to make sure you’re paying a fair cost with a reliable life insurance company. If possible, you can also make auto payments to ensure that you don’t fail to pay and lose insurance coverage.

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