You have probably heard the advice. It comes from celebrity financial planners, your personal financial advisor, your insurance agent, and everywhere in between. The advice to load up on life insurance. They say to get it if your young, get it if your old, get it if you have a family or even if you don’t. But what’s the real deal; do you really need life insurance? We cut to the truth and tell you the scoop here. Read on to find out if you need life insurance or not.
Are you Under 35 and Single
If you are under 35, unmarried and you don’t have any kids, you probably don’t need life insurance. Chances are you have a small life insurance policy through your work. All you want to make sure is that if you were to die unexpectedly that your family won’t be stuck with paying expensive funeral costs or other debts like a car that they may be co-signors on. If you have a large joint debt remember that any co-signors are still responsible for covering the debt even if the primary borrower has passed away. Chances are large debts have underlying assets that can be sold. If a house can be sold easily for more than the total due on the mortgage for instance, you don’t need to worry as long as the asset is going to go to your consignor if you die. There is just one exception.
If you have Student Loans and A Cosignor
If you have student loans and a family member or other friend co-signed on them, remember that even if you pass away they are stuck paying them until they are paid off. If you are in this situation you probably want to have enough life insurance to cover the amount left on the loan, even if you are young and single. If you are young and single chances are that a level term policy will be inexpensive enough that you can just carry the annual payment (probably under $150 a year or about $12 a month).
If You are Married or Have Kids
If you are married and/or you have kids, you almost certainly need life insurance. If you are married without kids chances are that your spouse will struggle to keep up their lifestyle without getting additional funds from the life insurance. They also will have trouble saving for retirement, and money from a life insurance policy can go a long way to achieving this goal. Think about all the troubles with employment, rising costs, unexpected repairs and other emergency costs that your spouse may have to get through after you die. Even if you don’t have kids its nice and almost necessary to make sure you have the peace of mind knowing that they will not struggle too much financially.
If you have kids the benefits of life insurance are pretty clear. College expenses, school expenses, food, cloths, dependence even after college all contribute to each child costing a small fortune in today’s day and age. If you have kids, whether you are married or not, you almost certainly want to be able to provide for them. Ideally you will do it while you are alive but if you pass away life insurance is a way to make sure that they won’t struggle until they can safely support themselves.
If you are Over Age 55, Married or Not
This is a tougher area to give blanket statements regarding life insurance to. So much depends on what you have accumulated in your life so far. Do you a significant amount saved up? Can your spouse support themselves in retirement? Do you have kids who are supporting themselves? Do you want to make sure you are able to leave your kids some money or enough money to pay the taxes and costs associated with inheriting other assets like a house, vacation home, camp, ect?
If you are married you need to make sure that your spouse has enough money to live out their retirement even if they live to be very old (don’t assume that social security is going to get them too far), and you want to make sure that they have enough money to bury you properly without being too much of a burden financially. You should at least consider final expense life insurance, otherwise known as burial insurance if you can’t definitively say that they can easily cover all of the costs to wrap up a death. If you are still at an age and health that you can buy a larger policy, and you think that it may provide some benefit to your spouse or children, you may want to consider it. You can look at quotes with us to see if life insurance is feasible or you can contact a local agent.
If you are Middle Aged and Single
If you are about ages 30-50, and you don’t have a spouse or children, you probably don’t have any pressing need for life insurance unless you have debts with consignors that need to be paid for after you pass away. One thing to consider is that if you were to have something really negative happen to your health, for instance a heart attack or cancer, even if you overcome it you will have a very hard time buying any life insurance in the future. If you think that there is a chance that you may one day have a spouse and or kids, you may want to get a starter life insurance policy just to maintain what is known as your insurability. Even a small policy can be purchased with a special rider called a guaranteed insurability rider (GIR in life insurance lingo) which allows you to buy additional life insurance with no underwriting at specified points in the future. You can also buy a level term policy that has an option to convert to a whole life insurance policy in the future which you can exercise if you have a need for long term coverage.
While there is no one sized fits all solution to whether or not you need to carry life insurance, it does benefit most people to carry a policy. It is an exaggeration to say that everyone needs a large policy, or that everyone even needs a policy. The advantages to buying a policy at a young age are usually that you are locking in a lower price, but it must be weighed against the benefit of not paying any life insurance premiums until you really need to own it. In our opinion it is most important to own life insurance if you have kids, a spouse, or debts with a cosigner like student loans.