A good financial advisor will always tell you: If you have loved ones who depend on your income, a life insurance policy is a must-have. If you were to die, an effective life insurance plan will ensure that all your family’s financial needs will be covered—from the monthly mortgage and utility bills, to your child’s college education. Without life insurance, your family could find themselves in dire straits if something happened to you.
Unfortunately, this advice often falls on deaf ears. According to the 2018 Insurance Barometer Study, 41 percent of American adults do not carry life insurance. On top of that, one of every five people who do have life insurance don’t carry enough to fully support their family.
If you do not carry any life insurance or have minimal coverage, here are three factors to consider:
1. Life insurance can be used for more than you think.
Many people mistakenly assume they have no need for life insurance if their children are grown and no longer require financial support. But life insurance coverage can be used for much more than supporting loved ones.
For example, the payout from your life insurance policy could be used to cover your final expenses, including medical bills, estate taxes, and funeral expenses. Without life insurance coverage, your family will be expected to foot these bills. Considering that the average funeral costs $10,000 or more, do you want to leave this heavy financial burden on your loved ones’ shoulders?
You can also designate life insurance proceeds to help fund a grandchild’s college education or even donate them to your favorite charitable organization.
2. “Three times your income” may not be enough.
You might have heard that the best way to determine the amount of life insurance coverage you need is to simply multiply your annual income by three. However, this amount may not be enough. Should your spouse be unable to work for some reason, three years’ worth of income will not be nearly enough to support your spouse for another eight, 10 or even 20 years.
For this reason, many professionals will tell you the “three times your income” method is not always a good rule of thumb. Because each family faces a unique set of circumstances and needs, be sure to consult your insurance agent and consider factors other than annual income. Determining the right amount life insurance requires a comprehensive evaluation of your financial goals, debts, investments, lifestyle, and habits.
3. You’re never too old to buy life insurance.
Many seniors believe life insurance is unnecessary because they no longer have loved ones relying on their income. But don’t forget — a life insurance policy can also help cover expenses after you die so that your family is not left with the bill.
Before you wave off life insurance, it’s important to know the facts. These valuable insurance policies can protect your family’s financial well-being, pay off your final expenses, and even fund a loved one’s home purchase or college education.
Of course, whether or not you qualify and how much you will pay for life insurance depends on your age, health, and the type of insurance you want to purchase. The best place to start is by meeting with a reputable insurance agent who can help you determine how much and what kind of life insurance you need.
One thing is certain: Everyone should consider purchasing life insurance.