Most people understand that having life insurance can help protect the people that we love, but knowing if it’s a good product specifically for you can get a little more complicated, especially if you’re young. At the most basic level, if you have people that depend on you, you should consider getting life insurance. This includes couples, multigenerational households, new parents, people taking care of a sibling, etc. Life insurance helps ensure that your loved ones will be taken care of in the event of your untimely death – and it’s tax free. For further understanding, here are some of the most commonly asked questions and answers on the topic that may be of interest to you:
Should I wait to get life insurance?
No. The sooner you have a policy in place the better! Every year that you wait, the cost will increase as rates tend to go up as you age. Buying a policy when you’re younger and healthier lets you lock in a lower rate.
How much life insurance do I need and how do we calculate it?
The amount of life insurance that you’d need depends on what you want to leave behind when you’re gone. There are two common methods for calculating the amount of life insurance coverage you should purchase:
1. The Needs Method – this calculates the amount needed to pay for outstanding debts, funeral expenses, taxes, household expenses, emergency needs, and educational costs.
2. he Income Replacement Method – this calculates the amount needed to replace your income for a specific number of years, usually until your youngest child is out of college or until your mortgage is paid off.
In addition to these two methods, you may want to consider other financial needs as well. For example, you might want to provide the financial means for your beneficiaries to take an extended bereavement period.
How does life insurance fit into my financial plan?
Think about the liquidity of the death benefit. Your death benefit will be paid in cash when you pass away. It’s a liquid asset that can be accessed quickly by your beneficiaries and it’s guaranteed; the value of the death benefit is not affected by the economy or changes in the stock market. You also have tax advantages, cash value, and a life insurance policy that grows tax deferred, which means beneficiaries receive the payout tax free. In addition, you have the ability to borrow from your policy while you’re still living. Participating Life Insurance policies allow you to take loans against the cash value within the policy – however, there are rules and guidelines you will need to follow to ensure that your policy stays active.
Should single people consider getting life insurance?
In short, yes! Life insurance is used to make sure loved ones aren’t left burdened by your debt. It can help to cover final expenses as well as funeral costs when you pass away – I’m sure as a single individual, you still wouldn’t want to leave your surviving parents or family members to come up with the funds to cover your funeral costs or debt.
If I’m a stay-at-home parent with no income, should I still get coverage?
Of course! Employed people aren’t the only ones who may need coverage. Stay-at-home parents provide a variety of services for their families that would need to be replaced if something were to happen to them. This includes childcare, cooking meals, cleaning, pet care, transportation to and from school for the children, etc. Hiring someone to provide these things for your family in the event of your passing would result in additional expenses. Having a life insurance policy in place would help cover this.
What if I have coverage through my employer? Isn’t that enough?
Nope, not at all! While it’s great that your employer is offering life insurance cover as a benefit, its typically not enough. Normally, life insurance offered through employers is only half to two times your salary. This is lower than the five to ten times your salary that’s often recommended.
What’s more, the life insurance coverage through your employer is only active while you remain employed there. If you leave their employ for a new job or to retire, the life insurance benefit doesn’t go with you. Having a personal life insurance policy in place ensures you’re covered no matter where you work or when you retire.
At the end of the day, having a life insurance policy in place is beneficial for most people of various social and economic statuses. Its overarching feature – that your surviving beneficiaries will have access to the liquid asset upon your death – provides peace of mind that your loved ones will have the help they need to cover your final costs, remaining debt, and other expenses when you’re no longer here to do so.
Mahkai Outerbridge is a Life Insurance Agent at Freisenbruch. To learn more, or if you have any questions, please contact her at mwouterbridge@fmgroup.bm, or call +1 441 294 4618 or +1 441 534 0006
