A human life is, as much as we like to think it’s not, finite. Most people will need life insurance at some point, but it doesn’t make sense to purchase a policy because a friend of yours told you it’s a good idea.
Life insurance provides families financial security in the event a spouse or parent dies, and insurance protection will help pay debts like education loans and mortgage payments. The proceeds from a policy can help with funding a comfortable retirement, support charitable giving and act as a keystone to a solid estate planning strategy.
Your favorite and beloved people may depend on your income. If they do, it makes sense to consider life insurance coverage.
If you’re still young, purchasing a “starter” policy makes the most sense as the younger you are, the less you’ll pay for your life insurance.
To determine the amount of coverage you need, consider the amount of money your heirs or family members will receive in the event of your death. Those funds are called a death benefit, and to arrive at the proper amount of life insurance you’ll need to provide for them, use an online life insurance calculators like this one from Life Happens.
It’s also possible to arrive at a number which meets your needs by simply multiplying your annual salary by ‘8’, and the result will provide you a ballpark number to begin your calculations.
You might also consider adding the list of monthly expenses your family will have to bear following your death such as mortgage, one-time charges or school costs. You can then use the total of those expenses, divide by .07 to come up with a sum of money to meet those ongoing expenses.
While a calculator is a useful tool, it won’t provide the sort of in-depth answers you might need. Calculators only allow you to perform hypotheticals results based on your rough assumptions. The real rubber hits the road when you discuss your needs with a life insurance professional.
Among them, you can select from the affordable premiums offered by term life policies choose permanent life policies which offer comprehensive coverage which can add cash value as part of their returns.
The bottom line? The core value of insurance policies derive from the trustworthiness of the companies that back them, so select your insurance provider wisely.
If you’re a touch more old school, you can always sit down with a financial services professional who can help you analyze all the factors and financial considerations to meet your family’s needs.
One more critical tool you need to find your way through all the ins and outs of buying life insurance is understanding the terms used in the trade from ‘premium’ to ‘dividend’ to ‘beneficiary.’