When you buy a home, get married or have a child, itâs all too common for those celebratory moments to also bring a realization that there are people who depend on you for their well-being. That makes the purpose of life insurance pretty simple to appreciate: Itâs a much-needed financial safeguard for the most important people in your life.
A life insurance policy payout can ease the financial stress of your death by helping your loved ones with daily expenses like the rent or mortgage, child care, debt repayments, and other numerous day-to-day expenses we all have. Most people will have a need for coverage at some point in their lives, which begs the question, âWhen should you have a policy?â
With marriage comes shared responsibilities that often extend to your finances. A life insurance policy can help protect your spouseâs ability to meet their day-to-day needs if youâre no longer there. Consider expenses like the rent or mortgage, utilities, car loan, credit card bills, and the many other day-to-day bills we share with our partner.
Ask yourself this simple question: Could your spouse or partner handle all of the child-related expenses if you were suddenly gone tomorrow? For most people, the answer is no. The proceeds of a life insurance policy can be used for things like the mortgage, child care, education expenses and more. Fortunately, coverage is usually affordable for young, healthy families. A sample term life insurance quote for a healthy 30-year-old woman purchasing a 30-year, $750,000 policy is $38.11 per month.
Speaking of parents, itâs not only the primary breadwinner who should have coverage in place. Though they may not technically earn a salary, stay-at-home parents contribute an immense amount of work to the household that would be costly for one parent to take on.
A mortgage is a significant debt that does not go away when you die. Once you purchase a home, itâs a wise financial move to purchase at least enough coverage to pay the mortgage in full. Doing so gives your beneficiaries more financial options so they can determine whether to keep the house or prepare to sell it.
When it comes to your estate, itâs near impossible to make sure your loved ones only inherit the good stuff. Along with a mortgage, credit cards and private student loans are common worries. Most of these debts are not forgiven when you die, which can then leave them to be collected from your estate. Should you leave behind an art collection and the private loans you took out when you studied art, one may need to be sold to pay the other.
Family structures can vary immensely, and itâs not always a spouse and kids who may rely on you financially. Whether itâs siblings, cousins or elderly parents, if you have loved ones who are depending on your income for their well-being, youâll want to consider how a life insurance policy can help protect them.
Once you reach the milestones where life insurance coverage is a must, youâll need to determine how much coverage is needed. The back-of-a-napkin answer is that most experts recommend coverage thatâs five to 10 times your annual salary. While thatâs a good rule of thumb, your calculations may vary depending on the specifics of your financial situation and family structure.
Fortunately, an online life insurance calculator can take the guesswork out of choosing the right amount of coverage. Itâll take into consideration your age, income, debts and family structure to provide a recommendation that suits your needs.
You donât buy life insurance for yourself; you buy it for the ones you love. Itâs a way you can ensure that your beneficiaries â the people who matter most to you â will receive a financial cushion to help them meet lifeâs challenges head-on if youâre no longer around.
Death is not an âifâ; itâs a âwhen.â With good planning, we can lessen the trauma of our death on others and make a final contribution to our loved onesâ well-being. Life insurance can be an important part of a responsible financial plan, as well as an appreciated, thoughtful and loving legacy.
What questions do you have about life insurance? Let us know in the comments below.
Brittney Burgett is a writer at Haven Life.
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