Life insurance is one of those things that most people feel they need, and Financial Advisors and telemarketers love selling it as it’s probably quite an easy sell. A small monthly cost which when you die will turn into a nice large lump sum payment to your family left behind. It’s one of those things which can really play with your emotions and seems like something that everybody definitely needs. So who needs life insurance? Do you need life insurance?
Why would you need life insurance?
Every body has different life circumstances, dependants and outlook on life so there is no “one solution fits all” kind of answer. The main reasons why you would need life insurance would be to cover large debts that you have when you die, as well as to look after loved ones you’re leaving behind. But if you don’t have any debts or you have no dependants then what’s the point?
It’s a personal decision though as family situations are different.
We’ll look at different categories of people who probably don’t need life insurance as well as those who do. The final decision should however be taken with proper consideration of all circumstances and sometimes a trusted financial advisor can assist you to think about things you may not have.
Who doesn’t need life insurance?
Have a look through this list and see if any of these describe you. If so, you possibly don’t need life insurance. But, read the next list too as there may be something that you’re not thinking about right now. This is quite “broad” so by no means definitive.
- You’re single with no dependants
- You have no debt (vehicle finance, home loan, etc)
- You’re just recently married and have no debts as a couple
- You’re a student (or under the age of 25)
- You haven’t started working yet
Who needs life insurance?
Now think about the opposites of everything listed above.
- You’re married
- You have debt (vehicle finance, home loan, etc)
- You have dependants that rely on you financially (either children, spouse or parents)
- You want to leave your family in a good financial situation if you die
If this is you, then you probably need life insurance!
But how much do you need?
This is an ever changing figure but you can reassess it at any time that you have a major life event such as a birth of a child, marriage, purchasing a property or ageing parents becoming reliant on you for daily needs. You may not be able to change an existing policy (as it is a contract), but you can take out an additional one if needed.
Think about the following. If you die now:
- How much debt do you have in your personal name that will need to be settled?
- How old are your children (if you have) and will they need to go through school and varsity?
- If your parents are dependant on you, what are their needs?
- If your spouse is financially dependant on you, what amount would you need to leave?
- Does your spouse have life insurance too? And if so, how much?
- Do you have other investments that your family would benefit from?
- What’s your biggest concern for when you pass away?
Here’s a great post on putting a value on YOU.
There really is no quick and easy answer and you should probably have a chat to a trusted financial advisor. Don’t however take everything they say as the gospel truth though. Question things and be sure to understand what advice they’re giving you and why. This is your financial future so you need to be in charge!
It is wise to have life insurance, but you’ll be wasting your money if you have too much. Take the time to plan properly and you’ll find that you can sleep just a little better at night with one less worry.
Article reposted with permission from Take charge of your money.