Should I Buy Life Insurance?

By on January 9, 2019

Should I Buy Life Insurance? And Which Type of Life Insurance is Best For Me?

Financial Planning Tools to Protect Your Dependents

The economy is tough, you are struggling just to stretch your budget to manage your household and the idea of buying life insurance may not be a high priority. Or maybe you know you need to purchase life insurance but keep forgetting to speak with your financial advisor. Don’t wait to plan for or purchase life insurance if you have a household to protect from the burden of your unexpected loss. It may end up costing you and your family more in the long run.

Life insurance is risk management solution for individuals to have peace of mind that their lost income, debts and expenses will not burden their family (or designated beneficiary) in the event of their death. The insured policyholder pays a premium – based on the cost to replace that income – to an insurer who will indemnify the insured with benefits when or if the policy comes to bare. But who should purchase life insurance? How much should a person purchase? And which plan is best for your lifestyle and financial situation?
Decide Whether Life Insurance is for You
Buy Life Insurance as early as you can, but not until you have a dependent – this includes, spouses, children and even business partners.

If you are the main breadwinner in a household with a spouse or children dependents, then Life Insurance is not something you should pass up. If you are a partner in a small business, then you should make arrangements to cover the financial loss of your partner. However, for those young adults in careers with assets and no dependents, seniors or parents with grown-up children and retirement benefits, then you can probably go without.
3 Reasons You Should Have Life Insurance

To pay for final expenses. Funeral and burial costs are rising, life insurance can take the financial burden off your family.
To pay off debts and estate taxes avoiding the risk to your mortgage, retirement funds or assets. Don’t lose the nest egg you’ve built up over the years and get coverage to protect the assets you pass on to your family.
Replace the income of a primary wage earner or business partner and maintain your family’s lifestyle or meet business obligations.

Determine the Type and Amount of Coverage You Need

Before you purchase life insurance, take a look at your current and projected after-tax financial worth to determine the type and amount of coverage you will need to help your family maintain their lifestyle. The type of life insurance policy you purchase will determine the cost of your premiums while providing a variety of benefits based on your needs.
Whole or Term Life Insurance
Some people need all the bells and whistles with easy to manage customized coverage for a wide variety of assets at any cost. Others need the maximum coverage a the lowest cost for specific period of time. Both types of life insurance has their benefits and drawbacks depending on the mortality risk, needs and situation the of the policy holder.

Whole (Permanent) Life Insurance

coverage for your whole life or until you turn 100 years old
high premiums cover all benefits with a portion of the premium payment invested
savings is meant to be a sort of long term investment or estate planning tool
excellent if you have a high-income but have trouble saving money
excellent if you are worried about contracting a life threatening illness which would render you ‘uninsurable’ in the future

Universal Term Life Insurance

provides specific death benefit(s) for a specific term at a fixed low premium
if the policyholder is alive at the end of the term, the premium is lost and a new premium must be calcuated
annual renewable term life may come in 5-year, 10-year, 20-year and 30-year contract terms
your premium will rise at the end of the term, because as you age your mortality risk increases
excellent if you’re struggling to make ends meet but looking to cover the loss of your wages in an emergency
excellent if you have mortgage payments, tuition payments or other financial obligations which will end at a specific date in the future

No matter which type you choose to purchase, life insurance will benefit your family and partners through a difficult loss. Don’t gamble with their livelihood and get protection if you need it.

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About Terri A. Kamoto

Senior writer for FSN - Terri is a former financial analyst dedicated to making personal finances, budgeting, investment and insurance advice accessible, up to date and easy to understand. It is hard to find professional advice written in a language someone without a financial background can understand. Terri helps companies synthesize industry lingo and expertise into clear and informative content which builds smarter, financially successful individuals. You can find Terri on !

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