For someone just starting out or those who are contemplating starting a family, life insurance is an important investment.
It could pay for burial expenses and help protect your family should something happen to you.
Although many people are covered by life insurance through their employer, those policies are often small and may not even be enough to cover funeral expenses.
Therefore, it is important to discuss your life insurance needs with a financial adviser or insurance agent while you are young and able to purchase affordable policies.
Know Why You Need Life Insurance
Before purchasing a life insurance policy, it is important to understand why you need coverage.
Even if you have substantial insurance through your employer, a separate policy will cover you should you lose your job, change professions or if your company stops providing such a benefit.
Life insurance provides financial security for your family.
Should something happen to you, your life insurance policy could cover college tuition, fund a retirement account for your spouse or support a charity.
Life insurance can also cover the costs of your funeral and burial expenses, relieving your heirs of that burden.
Determine an Amount
The money your beneficiaries receive from your life insurance is known as the death benefit.
It can sometimes be complicated to determine how much life insurance is enough, but one rough estimate recommended by financial advisers is to take your annual salary and multiply it by eight.
That may seem excessive, but remember that your family may need to live on that amount for a significant period. However, the best way to determine how much life insurance will be enough is to discuss your needs with your financial adviser or insurance agent.
Choose the Right Policy – Term Life or Whole Life?
There are two options for life insurance policies.
Term Life offers more affordable premiums, but does not build any cash value. This means the policy is not worth anything until you die, at which time your heirs will collect the death benefit.
Whole Life policies cost more, but the policies build cash value as you pay the premium. The cash value can be borrowed or the policy cashed in to pay for large life expenses, such as college tuition.
Although most companies offer life insurance to employees as benefits, it is important to discuss the financial needs of your family should something happen to you. Visit here to learn more about life insurance policies and how to protect your family after you are gone.
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