A rule of thumb for life insurance is to purchase 7-10 times your income. While this may be a quick and easy way to calculate the amount of life insurance needed, there is a more accurate method. It’s best to use a life insurance needs calculator. This is also referred to as a needs analysis or calculation formula. To make it easy you can use an online life insurance calculator.
Do I need life insurance?
Many consumers wonder who needs life insurance coverage!
If you are asking yourself about your needs, here is a simple guide. People have insurance needs at different stages of life. It’s important to understand how it works.
One of the most common motivations to buy life insurance is to cover the cost of mortgage debt. Another runner up would be for funeral costs. It’s a good idea to stop and consider what your family’s greatest need would be if you pass away. This is how you can begin to decide on the death benefit amount.
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Who need term life insurance?
Term life is used to cover temporary risks for your loved ones. For example, paying off your mortgage. Chances are you don’t intend to carry one forever! If you die before you can pay it off than your loved ones may have a hard time keeping a roof over their head.
It’s recommended to cover your mortgage balance in your life insurance plan. What about mortgage protection insurance?
The problem with mortgage life is that the mortgage lender is only concerned about their balance NOT the rest of your family’s needs. This type of plan is often more expensive than your own policy.
You may not even realize you are paying for it! Loan officers get credit for these types of add-ons when they are processing your loan. Be sure to compare the cost between an individual life policy and theirs before closing.
Do you need life insurance to get a mortgage?
This usually not a requirement; however, lender’s may review take your specific situation into account. Most of the time it doesn’t come up as lenders offer mortgage protection on the loan.
A key take away here is that you do not have to purchase such protection from your lender. There may be some advantages though such as no medical exam.
Keep in mind that several individual life insurance plans are now allowing up to $500,000 in coverage without the need for an exam.
On your own plan the life insurance company pays your beneficiary directly. This allows them to make decisions on what should be paid and when.
Don’t worry, many companies offer beneficiary counseling after the loss of a loved one.
Does a single person need life insurance?
Single people rarely think about buying this type of insurance!
This can be a huge risk for their future dependents. Due to the fact that coverage is inexpensive, it’s my recommendation they purchase 20-year term life.
A general recommendation is that people who are in theirs 20’s and 30’s purchase some form of life insurance. Even if they do not have a spouse or child, there is a good chance they will.
Life insurance rates are based on age and health. It’s cheaper when you are younger. Not only that but when you are younger the risk of having health issues is lower.
Wouldn’t it be shame if a single person waited until they needed a plan, only to find it’s expensive or unavailable?
As a life insurance broker, my recommendation is for single people to think forward. Although there are some people who are certain they’ll never have a family.
Why do you need life insurance if you have no dependents?
The simplest answer is to cover funeral expenses and any outstanding debts. GoFund Me campaigns rarely raise enough fund to cover what is needed!
If you are asking “Do I need life insurance at age 25?” than my advice would be to first consider funeral expenses and second your future plans as mentioned above.
The average cost of a burial is $10,000-$25,000. Cremation of course is much cheaper at $2,000-$5,000. The price can vary by location and the extent of services.
Most people don’t realize there can be other costs associated with someone’s death. You may have heard that death is expensive! It doesn’t really hit home until you’ve experienced the loss of a loved one personally.
Here are some commonly, overlooked reasons to carry coverage:
- Medical bills from an accident or illness
- Transportation costs for a body between states/countries
- Debt payoff for loans that are co-signed
- Paying off creditors even if there are no co-signers
Do I need life insurance after 60?
The goal should always be to not need life insurance later in life. However, I’ve spoken with many consumer over 60 who do.
If you are financially wise and frugal in your younger years, than you can build enough assets that coverage your liabilities. That being said many look to life insurance as a means of reducing estate tax.
Final expense is most common form of long term coverage. Although, there are alternatives. It pays to consult with a life insurance broker who can offer several plans as well as companies.
Use this easy, 3 step process to see if you need life insurance!
What is life insurance and how does it work? You may have heard that buying life insurance coverage is a good idea. However, you’d like to know how exactly it works first! The simplest explanation is that if you agree to pay your premiums to a life insurance company then your beneficiaries receive a death benefit when you die.