Why You Need Life Insurance
There are many reasons that an individual needs to have life insurance and most are pretty obvious. If you have dependents it is a given that you should have sufficient life insurance for your family in the event that you predecease them. However, if you have no dependents you may wonder if having life insurance is a necessity for your particular situation. This would depend on what type of assets you have and specifically how much. There is still the cost of the funeral, and any debt that you owe at the time of your passing will need to be paid as well.
How Much Coverage Do You Need?
There are a few things to consider when deciding how much insurance you should purchase. If you have no dependents, you can simply add the average cost of a funeral in your area (Indiana average cost is around $7000), plus any debts that you currently have and subtract your savings (401k, personal savings, etc.). If you do have dependents there are many ways to gauge how much insurance you will need. One way that I like to use is by determining how many years you have until you’ll likely retire. Next, determine your annual income and determine any future expenses (kids college, etc.). Multiply your annual income by the number of years you have until retirement and then add any future expenses and current debt. After you have this number subtract your current savings (401k, etc.) and this is the amount of life insurance appropriate for you. It is also a good idea to use an online life insurance needs calculator to factor in for inflation.
What Are the Different Types of Life Policies?
So now that we have an idea of how much coverage you need, lets consider a couple of different products that will provide you with this coverage. I’ll provide you with an overview of both term and whole life. Whole life is permanent insurance that stays active as long as premiums are being paid. Premiums are typically higher with whole life policies. The reason for this is that once the policy is in place there is no term, in other words the policy does not end, until death or non-payment. Whole life policies also build a cash value that can be accessed by the policy holder prior to death. Term polices on the other hand do have a set termination. Most term policies can have terms between 10 and 25 years. They do not have a cash value and of all the life policies available, term insurance is usually the least expensive. If you have questions about a policy or would like help with finding the policy that is right for you, you can work with a local life insurance agent in your area at no cost to you. Larry Medcalf is a licensed insurance agent. His main focus is on serving the life, health, medicare and long-term care insurance needs of small businesses and middle-income families and individuals in Indiana, Ohio, Michigan and South Carolina.