Life Insurance is the price tag for growing older and becoming an adult. Heaven forbid that anything tragic happens to you, but if it does, insurance will be your safety net. You have health insurance in case you get very ill. If you own a car, you purchase auto insurance in case you get in any kind of accident. But do you really need to have life insurance? Maybe, maybe not. If you are unmarried and don’t have any kids or other dependents, you may not need life insurance at this moment. That is because life insurance is not in fact for the insured person but for the people who depend on you financially.
Picture This
Think for a moment about how your life is currently. For example, let’s say your household has two incomes, earning enough to comfortably handle the mortgage, car note, and other monthly bills. You earn enough with those two incomes that you can set aside savings for the future that include retirement, schooling, and even a little emergency fund. The rewards of working diligently and managing your finances have allowed you to bring up your family in a safe environment that is surrounded by quality friends and neighbors, as well as excellent schools that make where you live the perfect place you had in mind for your family.
Now, imagine how different everything would be if unexpectedly one of you died and that second income went away. Would your surviving partner be able to afford monthly bills, or would he or she eventually fall into debt? If they could not afford to live in the same house, could they keep up with the mortgage payments until the house had sold, or would they likely risk foreclosure? Would the emergency funds be enough to afford the immediate expenses associated with the final medical bills and a funeral, or would they have to spend money saved for retirement or college?
Who needs life insurance?
What is surprising is that even though Americans consider life insurance necessary for the financial security of their families in the future, an estimated 41% of us asked in a 2017 survey from industry groups Life Happens and LIMRA said they do not have a life insurance policy.
If you have shared debts or others in your household rely on your income for their financial wellbeing, then you would be wise to consider getting life insurance coverage in the near future.
How to estimate your life insurance needs.
Talk the numbers through with your spouse. How much money does he or she think the family would need to afford things without your income? Do your estimates seem accurate to them? For example, would your family have to replace your full income or just a percent of it?
Your plan should take into account some of your future expenses, like college expenses, and the expected growth of your income and assets. This allows you to estimate your life insurance needs to the fullest extent that is needed to ensure the ones you love have a secure future even if something expected were to happen.
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