When our first son was born, I insisted that my husband and I purchase our first life insurance policies. The topic of life insurance can be overwhelming—and not just because it involves dealing with your own mortality. Everyone’s personal situation is different, so the need and timing for life insurance can vary. It’s enough to intimidate a staggering three in 10 U.S. households have no life insurance at all.
Heavy as the topic can be, life insurance is a crucial part of your financial plan if others are financially dependent on you. With the right assistance, I found the life insurance process to be painless and easier than I expected. Use these questions as a guide to get you started, and you may find it simpler to tackle than you think.
1. Do I have other people counting on me for my income?
If your answer is yes, you need life insurance; it’s as simple as that. In my case, where my husband and I both work, we discussed the amount of life insurance we both need to cover monthly expenses for our children, including daycare.
If you answer “no” to either of these questions, then there is probably no need for life insurance at this point in your life. However, keep in mind that any major life event, such as marriage or the birth of a child, could change your need for life insurance.
2. What will the insurance be used for?
If you’re a sole breadwinner, it’s important to discuss with your partner if the other would go back to work if something happened to you. In that case, you wouldn’t need as much insurance as if the payments would need to cover all family expenses.
Other items to consider are your current liabilities and education planning. For instance:
- Do you want your mortgage to be paid off if you pass?
- What about college? Do you want to have money set aside to help your kids pay for the ever-increasing cost of an education?
3. How long do I need the insurance?
For most people, the need for insurance decreases over time as you build wealth and ends entirely when the youngest child graduates from high school or college. In my case, term insurance was the easy answer. In fact, term insurance is the answer for most people. You can maximize your coverage (death benefit) at a fraction of the cost of permanent insurance. A relatively low monthly expense can give you peace of mind from knowing your family will be taken care of if something happens to you.
That said, there are times when permanent insurance makes sense. People who have children with special needs could be great candidates for a permanent policy. Permanent policies also make sense for those who may have a taxable estate. They are quite a bit more expensive, but they can play an important role in your overall estate planning strategy.
While we have no intention of ever needing our life insurance policies, it gives my husband and I great comfort to know that our kids will be taken care of if something were to happen to us. Your Wealth Manager can help you get started by identifying what type and how much life insurance would be appropriate for your situation. With a bit of guidance, the process may be much easier than you expected!
This post was written by a member of the Plancorp Women’s Initiative, which strives to advocate for clients and women in the community by addressing topics specific to their financial lives. For more information about the Women’s Initiative and how you can get involved, email firstname.lastname@example.org or visit the Plancorp Women’s Initiative page.