Life Insurance: Do You Really Need It?
Lots of folks aren’t clear if they need life insurance or who actually needs it. Lately, many of us been compelled to think about life insurance because of the horrible hurricanes that hit Lousiiana, Texas, Mississippi, and Alabama. The loss of life has been tremendous. How many of those killed had life insurance, or of those who did if they had enough to take care of dependents spared by the storms.
Here are some real life examples of people who do and don’t need life insurance:
These People Don’t need
A minor child: Life insurance is intended to care for dependents. Unless you are dependent on your offspring for income, you don’t need a life insurance policy on a minor child (that includes a teenager or college student).
Single adult, no children or other dependents: If the only person depending on income is you, then obviously you don’t need life insurance.
Married, child is an adult, nearing retirement: Once your child is out of college or living on his or her own, you should re-evaluate your insurance needs. If you’ve been saving and you have adequate retirement savings and investments, you don’t need life insurance anymore.
These People DO Need Life Insurance
Single-adult with dependent child: Unless your former spouse or baby’s daddy (or mommy) is capable of carrying all the costs of raising your child, you need life insurance. Nearly 4 in 10 single parents have no life insurance coverage of any kind. Of those who have coverage, nearly two in three consider their coverage inadequate, according to LIFE. The typical single parent only has $60,000 in life insurance coverage.
Married, no children: If you have a mortgage and other household expenses that your spouse can’t handle on his or her own, get life insurance.
Married with children: You’re in the same position as a single parent with a dependent child.
Stay at-home parent: Consider buying life insurance if your surviving spouse will have to pay for child care or other services formerly provided by the stay-at-home parent.
There are two important questions to ask when determining your life insurance needs, according to Woods:
How much money will your dependents need to cover immediate costs, such as your funeral arrangements and current living expenses?
How much money will they need for the long term, such as college expenses?
Don’t assume you can’t afford enough coverage. A 40-year-old male can purchase $500,000 of life insurance 20-year level premium term life insurance for $375 a year, or a little more than $1 a day, according to LIFE. A 40-year-old female can purchase $500,000 of 20-year level premium term life insurance for $320 a year.