If you’ve decided you don’t need life insurance, you might want to reconsider. Read on to learn why.
Life insurance is a contract between you and an insurance company. You agree to make monthly payments to them and they agree to pay your beneficiaries a lump sum upon your death. That money can be used by your loved ones to live on and to pay expenses, such as funeral, medical and legal expenses.
There are two main types of life insurance. Term life insurance covers the policyholder for a limited number of years. Permanent insurance, such as whole and universal life, provides lifetime coverage.
There are a lot of excuses for not buying coverage. Do any of these fit your concerns?
• I’m Single – Even single people need coverage. Purchasing life insurance is one of the best ways to ensure that your parents or siblings are not left paying your bills. There will be funeral expenses and you might have a mortgage and other bills that need to be covered. The average cost of a funeral is currently around $7,200.
• I Already Get Coverage Through My Employer. Why Do I Need More? – Employers usually provide term life insurance equal to one to two times your annual salary. If you’re single, this type and amount of coverage might be enough. If you have dependents, you’ll probably need more coverage. The loss of your salary means your family will need time to make up the difference or will need to downsize. A life insurance policy gives them time to make these transitions. A policy also can help them pay estate taxes. Another consideration is that you will lose this insurance if you leave your job.
• I’m a Stay-at-Home Spouse. I Don’t Have an Income – Think about how much you do at home. The cost of paying someone to cook, clean, run errands, provide transportation and provide childcare can be prohibitive.
• My Investments Will Cover Any Expenses – If you’ve saved $1 million, then you might be at the point where you can either discontinue your policy or lower the amount. Much depends on your expenses and bills. Keep in mind it also will be the only money your spouse and children have to live on. If you haven’t amassed a large fortune, a life insurance policy is a must to cover your dependents’ immediate and long-term needs, such as paying the mortgage or covering college expenses.
• I Can’t Afford Life Insurance – You might be surprised at what life insurance costs. Accuquote.com officials have stated that the cost of a simple term life insurance policy is 60 percent lower than it was 16 years ago. One example: a healthy 40-year old nonsmoker can purchase $500,000 of coverage for 20 years for $31 per month.
• I’m Not Healthy Enough to Qualify for Life Insurance – It might cost you a bit more than if you were healthy, but some carriers specialize in providing coverage to people who are considered high-risk.
• I’m Too Young to Think About Life Insurance – Unfortunately, you never know when your time will come. And, if you become seriously ill, you may not be able to get the amount of coverage you need. If you have expenses, providing funds to cover those costs can be a kind gift to leave your loved ones.
How Much Do l Need?
If you now realize you should purchase life insurance, you’ll have to decide how much coverage you will need. Factors to consider include:
• Medical and funeral bills
• Mortgage payments
• Credit card balances
• Adequate cash flow once the wage earner’s salary is gone
• College funds for dependent children
• Care expenses for adult dependents, such as elderly parents.
If you don’t have life insurance yet, you’re not alone. The Life and Health Insurance Foundation for Education estimates that 40 percent of adults in this country have no life insurance. A good rule of thumb is to purchase life insurance that is worth 10 to 20 times your annual salary. However, a qualified life insurance agent can help you determine the best amount and type of coverage for your and your dependents’ needs. Please contact us for more information.