Not everyone needs life insurance,
and if you have a moderate or strong benefits package in your place of
employment you might be covered sufficiently. But a common mistake is to assume
that having life insurance through your employer is enough to cover all of your
needs as your life circumstances change.
Living without Dependents
When you don’t have children or
older individuals depending on you and your income, your life insurance needs
are minimal. Should you pass during this stage of your life you’ll need only
enough life insurance to cover your final burial and estate costs. These
include any funeral expenses, which can easily be more than $10,000 and final
payments on all outstanding accounts, not including your car or home loans.
Should you have an untimely death
at this stage, your credit cards and other loans will need to be paid off to
settle your estate and your funeral expenses will be paid. Selling your house
will likely cover any remaining mortgages and selling your car will pay off
that loan as well. That leaves items such as your credit card balances and
student loans. These loans are not forgiven when you die, your estate is asked
to pay the balances. Life insurance through your employer might be enough to
cover the loans, but if you have a great deal of debt you’re working to pay
off, a small outside policy will help as well.
Married Life
When you marry, most couples today
come with their own income and their own careers – at least for a time. It
would seem that this independence is enough to cover things in the case of your
demise, but this isn’t always the case. When you combine two incomes, your
household expenses generally go up. Look over the married finances. Are you
using two incomes to pay for your home and cars? If you pass, would your
partner be able to continue making payments on her own? If not, look at what is
available through your work life insurance policy. If that policy isn’t
sufficient, take out a separate policy to either pay off the house or to pay enough
that your partner can take on the rest of the responsibilities on a single
income.
Life with Dependents
Children change things
dramatically. When you have children, suddenly you feel like a true adult with
a huge weight of responsibilities. If you or your spouse stays home with the
children, the single remaining income is even more crucial. Both partners
should have a high amount of life insurance, however, not just the parent
working outside of the home. The breadwinner will need enough insurance to
cover the cost of burial as well as settling as many debts as possible. In
addition, you’ll want to figure in your future income over the years and what
it would take monetarily to secure the child’s future. The number is often well
over a million dollars. Most workplaces don’t offer insurance benefits to this
level making outside insurance necessary.
The parent at home needs to be
insured as well. That parent is covering the cost of childcare. Compare childcare prices in your area to
determine what you’d have to pay to properly care for your children if your
partner is unable to do so. Even school age children will need care to cover
before and after school hours, school holidays and summers. This makes
childcare costs rise dramatically and the true value of that stay-at-home
parent exceptionally clear.
