When investigating life insurance options, there’s one question people typically ask themselves: Do I really need life insurance coverage? Like all kinds of insurance, life insurance provides peace of mind regarding what would happen if you died unexpectedly. In order to figure out whether peace of mind is worth its cost in this case, you can answer that question with a question — five, actually. If the answer to any of the following is yes, then you probably need life insurance:
- Are You the Primary Wage Earner?
If you are the sole or primary wage earner in your home, you need to consider how your family would make up for that lost income. Do you have a spouse who could immediately begin working? It’s often difficult for a widow or widower to find high-paying work quickly, especially if she or he has been out of the job market for quite some time (to raise children, for example).
- Do You Have Dependent Children?
Any parent knows that raising children is expensive. It’s common to purchase life insurance to provide for big costs such as a child’s college education.
- Do You Have Outstanding Debt?
Some types of debt may require you to purchase life insurance. But you should also think about debt such as a mortgage. Would your dependents be able to continue making payments, or would your death cause them to lose the house?
- Would Your Savings Cover Funeral Costs?
End-of-life care and funerals can be very expensive. A funeral alone can cost more than $10,000 dollars. If those kinds of necessary expenses would place a burden on your family, even a small life insurance policy might be a smart move. Life insurance can also cover estate costs such as inheritance taxes.
- Do You Want to Donate Upon Death?
Life insurance isn’t used only to provide for dependents after death. It’s also possible to take out a life insurance policy to donate money to a charity or cause.
If you do decide to purchase life insurance coverage, it’s a good idea to shop around for quotes from various life insurance carriers; not all insurance providers will assess you the same way, which means you may get better rates from some companies than from others. Also keep in mind that the best life insurance policies are those that also provide you with investment opportunities and the ability to draw benefits while you’re alive.
Did you answer yes to any of the questions? Share your thoughts on life insurance coverage in the comments.