Do you really need life insurance? Well, if someone is dependent on your income-whether it’s your children, spouse, parents, or siblings, it’s a good idea to protect them with a life insurance policy.
Let me first say that life insurance is VERY affordable and having it will give you and your family peace of mind.
Life insurance will ensure that the people who depend on you will not struggle financially if you should die prematurely.
If you are a stay-at-home parent, you will also need life insurance. If something were to happen to you, the proceeds could be put away for your children’s future or used for current expenses.
If you are taking out a life insurance policy to protect small children, you will need a policy that ranges from 20-25 years. Your children will eventually grow into (hopefully!) independent adults and will no longer be dependent on you.
When the policy ends in 20-25 years, you should have accumulated sizable assets and paid off all debt which would make having life insurance unnecessary.
How much to have? A general rule of thumb is to take out a policy that is at least 10 times your annual salary. The goal is for the survivors to invest the proceeds (death-benefit payout) and live off the interest without touching the principal amount. The death-benefit payout is usually tax-free.
For instance: You take out a $500,000 policy. Your beneficiaries invest the $500,000 and earn 10% per year. That would pay them $50,000 per year in interest income. ($500,000 x .10= $50,000) The principal amount remains intact and will pay them interest every year to live on.
If you think your beneficiaries would need $100,000 per year, take out a $1,000,000 policy. ($1,000,000 x .10= $100,000)
When searching for a policy, seriously consider a Term Life Insurance Policy. Cash Value policies are very expensive and go by the names: Whole Life, Universal Life, and Variable Life. They are offered by salespeople as a life insurance policy and savings tool for retirement, but remember the reason you are getting this policy is to protect your dependents when you die.
A term policy can be about 80% cheaper than a cash value policy. How much you pay is determined by your age, health, and the amount of insurance you require. The younger and healthier you are, the lower your premiums.
Be sure to get a policy that will not increase your premiums during the term of the policy. It is called “Annual Guaranteed Renewable Term”.
Check around for quotes to get the best rates. You can start your search here. You will be pleasantly surprised to find out how inexpensive life insurance can be!
So, to answer the question, “Do You Really Need Life Insurance”? I would say, “Yes”! 🙂
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