Who Really Needs Life Insurance?
At different points in your life you may wonder, “Should I get life insurance?” or “Is the life insurance I have enough?” You may have an employer, friend, or family member telling you to get life insurance and another saying not to worry about it right now. Who do you listen to? How do you know if you really need it or not? This article will answer the most basic of questions: Who really needs life insurance?
The most common line of thinking regarding life insurance is you only need it if you have dependents. If this is what you’ve heard too, it’s partially correct.
Let’s start there.
Individuals with minor children definitely need coverage. Think of it like this: If you were to pass away unexpectedly, who would take care of them financially? Are you comfortable saddling them with such a financial burden? If you are unsure, you need life insurance.
In most cases, you only need to worry about providing for your children until they reach the age of 18. Maybe 22, or after they graduate college. The exception is if you have any children with any type of handicap or impairment. In certain cases, a child may be financially dependent on you for the rest of his or her life. In that case, you may need a different type of coverage, but no question, you need insurance.
Life insurance essentially makes up for your income, should you no longer be here to provide it. This is why even if you don’t have children, married people often get life insurance. The death benefits will allow the survivor to continue to pay the bills and any debts, and reduce the financial strain of losing an income.
It’s not just your income that life insurance will need to replace upon your death.
Think about:
- health benefits with your job
- retirement contributions
- childcare subsidies
These are all added benefits a working person can partake in. If you are no longer here to draw these benefits, life insurance can help cover these costs as well.
While it’s true that those with dependents (children or spouses) need life insurance, there are occasions when a single, childless individual should consider life insurance as well.
According to MSN Money, “Even single people should have at least enough life insurance to cover the costs of personal debts, medical and funeral bills.” No matter how carpe diem you try to live, most people have a car loan, student loan, or credit card balance with the assumption they will be able to continue to pay them off. Debts are not simply ignored when you pass away and funeral services are not free.
So, you’ve determined you need life insurance.
Now begs the question, “How much?”
The answer to this question ranges from one to eight times your salary. But you can’t just think about the salary you’ll be replacing, or even the work-related benefits, as mentioned above. You also have to consider any debt you’ll be leaving behind.
There is no set age for when you should get life insurance. It depends on who relies on your income and benefits, as well as how much debt you have. The bottom line is:
You should have enough coverage to pay off all your debts and provide income for your family who depends on you, as well as cover funeral costs.
To determine what that number is, consider what expenses your family is likely to have over the next 10, 15, or 20 years. Take into account the ages of your children, or if you plan to have children in the foreseeable future.
When it comes to life insurance, it’s usually better to have too much than too little. The last thing you want is for the loved ones you leave behind to face financial hardship alongside the emotional difficulty of your passing.
