When you buy a home, get married or have a child, it’s all too common for those celebratory moments to also bring a realization that there are people who depend on you for their well-being. That makes the purpose of life insurance pretty simple to appreciate: It’s a much-needed financial safeguard for the most important people in your life.
A life insurance policy payout can ease the financial stress of your death by helping your loved ones with daily expenses like the rent or mortgage, child care, debt repayments, and other numerous day-to-day expenses we all have. Most people will have a need for coverage at some point in their lives, which begs the question, “When should you have a policy?”
When Should You Have Life Insurance?
With marriage comes shared responsibilities that often extend to your finances. A life insurance policy can help protect your spouse’s ability to meet their day-to-day needs if you’re no longer there. Consider expenses like the rent or mortgage, utilities, car loan, credit card bills, and the many other day-to-day bills we share with our partner.
You’re a Parent
Ask yourself this simple question: Could your spouse or partner handle all of the child-related expenses if you were suddenly gone tomorrow? For most people, the answer is no. The proceeds of a life insurance policy can be used for things like the mortgage, child care, education expenses and more. Fortunately, coverage is usually affordable for young, healthy families. A sample term life insurance quote for a healthy 30-year-old woman purchasing a 30-year, $750,000 policy is $38.11 per month.
You’re a Stay-at-Home Parent
Speaking of parents, it’s not only the primary breadwinner who should have coverage in place. Though they may not technically earn a salary, stay-at-home parents contribute an immense amount of work to the household that would be costly for one parent to take on.
You Own a House
A mortgage is a significant debt that does not go away when you die. Once you purchase a home, it’s a wise financial move to purchase at least enough coverage to pay the mortgage in full. Doing so gives your beneficiaries more financial options so they can determine whether to keep the house or prepare to sell it.
You Have Debts
When it comes to your estate, it’s near impossible to make sure your loved ones only inherit the good stuff. Along with a mortgage, credit cards and private student loans are common worries. Most of these debts are not forgiven when you die, which can then leave them to be collected from your estate. Should you leave behind an art collection and the private loans you took out when you studied art, one may need to be sold to pay the other.
You Care for an Elderly Parent or Other Family Members
Family structures can vary immensely, and it’s not always a spouse and kids who may rely on you financially. Whether it’s siblings, cousins or elderly parents, if you have loved ones who are depending on your income for their well-being, you’ll want to consider how a life insurance policy can help protect them.
How Much Life Insurance Do You Need?
Once you reach the milestones where life insurance coverage is a must, you’ll need to determine how much coverage is needed. The back-of-a-napkin answer is that most experts recommend coverage that’s five to 10 times your annual salary. While that’s a good rule of thumb, your calculations may vary depending on the specifics of your financial situation and family structure.
Fortunately, an online life insurance calculator can take the guesswork out of choosing the right amount of coverage. It’ll take into consideration your age, income, debts and family structure to provide a recommendation that suits your needs.
Life Insurance Is a Gift
You don’t buy life insurance for yourself; you buy it for the ones you love. It’s a way you can ensure that your beneficiaries – the people who matter most to you – will receive a financial cushion to help them meet life’s challenges head-on if you’re no longer around.
Death is not an “if”; it’s a “when.” With good planning, we can lessen the trauma of our death on others and make a final contribution to our loved ones’ well-being. Life insurance can be an important part of a responsible financial plan, as well as an appreciated, thoughtful and loving legacy.
What questions do you have about life insurance? Let us know in the comments below.
Brittney Burgett is a writer at Haven Life.
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