There is a need for most people for life insurance and if they have it, they might be really under insured. If you are raising children the question arises. do I need life Insurance? If so, how much do I need. Lets look into it a little deeper. Lets dig a little deeper to determine your need for life insurance and how much life insurance you may need.
1. What is your Income?
Life Insurance with children is there to replace your income when/if you die. If you have children that you financially support, you should replace your income for every year they need support. Quick example your youngest child is 10. If your plan is to support them through college, you should get 13 years of income. If you want to pay for the college it could be more. That.s a quick way to look at it.
2. What Will the Money Be Used for?
Simply having life insurance as a single parent might not be enough. Many parents set up a trust that can delegate where, when that money gets used. Do you want the children to get a lump some during college? Would you like the Family home to be paid off? This is something that you should consider and discuss.
If you have young children in the home, for example. Your insurance policy may be needed to only supplement income. Lets say that you have a financially secure relative that could take care of your children. If your chosen guardian is financially secure and able to take on your children with extra money. This could change the amount of life insurance needed .But if you haven’t, or your chosen guardian doesn’t have the means to raise them without help. You may want too use the simple way of replacing income.
If your children are older, you may want to use life insurance as a way to pave for the future. For example, the Life insurance policy can help pay their college costs. Annual costs for tuition and fees can range from a thousands of dollars to upwards of $50,000 at private colleges. When your children are older you need to factor in their plans. You also have to decide if this is something you would like to do. When it comes down to it you will never see the payout of life insurance. You do it because you care, however you want to break the bank.
3. Do you have debt?
If you have debts you have to decide what you would like paid off. Most people like certain things paid off car, home many of things. This is secured debt. This is really all you need to worry about. Your estate is obligated to pay all debts. This means savings, retirement fund. Gold bars.
However, your beneficiaries will receive your life insurance payout even if you have outstanding debt or if your deceased estate is bankrupt. The payout will go to your beneficiary. So in most cases the money can not be collected from you beneficiary to pay off your debts.
So decide what you would like paid off and address that via a trust or an understanding with your beneficiary.
4. How much can you pay?
Life Insurance gets more expensive the more coverage you want. 500k will be more than 250k. Term life is the least expensive option for you. I cover people daily for $20 a month. Most cases the younger you are the least expensive the coverage will be for you. We are not getting any younger or healthier.
You have whole life policies that can earn cash value this can provide a savings later in life. Term life policies, on the other hand, guarantee a rate for a certain amount of years. 10/20/30. The trade-off with whole life insurance, however, is that the premiums are usually much higher. So you have to look at the good and bad of each, look at costs, how long you need it. Remember the important thing is to get the coverage that is right for you and your family and a price that you can afford to pay.
- For a better understanding about the prices of life insurance you can look at my free Life Insurance Quoter.
- If you need to talk to someone to clear it up, founds yourself a knowledgeable agent, Make sure they represent multiple companies and been in the industry more than a few years.