The Importance of Life Insurance
July 2, 2008 by Miranda Marquit
Filed under Finance
When engaging in financial planning, it is important to remember the life insurance. And, the earlier you get it, the less expensive it is. So, if you are young — and even if you are unmarried — it might not be a bad idea to get some life insurance now. Unless you don’t ever plan on having a family that might depend on you.
The fact of the matter is that life insurance is designed to help provide for the people who are left behind should something happen to you. And these economic times, I can’t stress enough how important it is to have life insurance so that your family has a means of support.
Life insurance provides for your family’s needs
Many people find that it can be helpful to combine a whole (or universal — they are two different options) life insurance policy with a term life insurance. While this can work for some people (it was working pretty well for us until the rate of return on the universal life policy dropped with interest rates), but for most people having a term life insurance policy alone is sufficient.
For both types of policies, your beneficiaries get paid when you die. This is important, because if your family relies on your income, you want them taken care of. I just upped my life insurance coverage so that if I die, my husband (who does have an income) can pay off our house and student loans, and set aside money for our son’s college.
Our coverage doesn’t amount to the “recommended” rule of thumb that says that you should cover yourself for 5-7 times your yearly income. Instead, our coverage revolves around what our needs would be. We put what we would have spent on more coverage into our higher-yield retirement savings and our emergency fund.
In the end, how much life insurance coverage depends on your needs, and factors such as number of incomes in your family and how many obligations and debts you have. Many workplaces offer group life insurance at good rates, and that can be a great tool. It doesn’t hurt to consult with a financial planner (fee-based, who doesn’t get commissions for selling you something) to help you figure out how much life insurance coverage you should get.
