What You Need To Know About Life Insurance

Let’s face it. There are plenty of other things on your mind other than life insurance. Buying life insurance is such a boring, overly complicated and yet necessary thing in your life. The truth is that while most people know that they need insurance, most don’t have a policy, or have one that doesn’t have the coverage they need to ensure that their loved ones are taken care of long after they pass away. The reason that most don’t have an adequate life insurance policy is that they simply don’t understand how it works or believe that they simply can’t afford it. This guide is designed to help make sense of life insurance and debunk the theory that they can’t afford it.

Determine whether or not you need life insurance. The first step in determining whether or not you need life insurance or not is to know whether or not there are others that depend on your for financial support. If the answer is yes, then there is no question that you need life insurance. If you don’t, then you could potentially get away without life insurance. However, know that without it, your loved ones will be left taking care of your final expenses when you pass away.

Determine how much Life Insurance you Need

When it comes to deciding how much coverage you need, it is important to consider two things:

Income replacement: If you are in the prime of your earning years and have dependents at home that rely on your income to survive, then you need to take the income replacement approach. Start with your current age and then figure out how many years of your income you will need to replace, usually up to the point that your children will leave home. Then purchase a policy that will replace your full income for this number of years. For example, if you are 40 years old and your children are in their early teen years, you may need to replace your income for the next 10-15 years in order to ensure that your family is taken care of.

Needs-based: This is a more pragmatic approach that will allow you to determine the value of your life insurance based on what the individual needs of your family are. For example, would your spouse’s income help to offset the loss of your income? Is there a mortgage to pay off? Do you need to account for your children’s college education? You will need to take your time and truly think about this scenario before deciding how much insurance is enough.

Determine the Type of Insurance you Need

A term life insurance policy is intended to cover your final expenses and provide money to help your family financially if you pass away. Term policies are extremely affordable, however they will only remain in force for a specified period of time and do not build a cash value.

Whole life or cash value life insurance policies are designed to be more like an investment as it builds a cash value that you can access throughout your life and the policy won’t expire until you pass away or choose to cancel the policy. These tend to be more expensive than term life policies.

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