With youth comes health and sometimes, a pervasive feeling of invincibility. Unfortunately, it is this youthful, healthy attitude that prevents people under 30 from properly planning for the future. Between college, dating, socializing, and your career, it’s easy to overlook life management factors like what will happen after you pass on.
Why Hold Insurance?
Understand that even when we take precautions, tragic life events can still happen. No matter how old you are, carrying sufficient life insurance is the best way to protect and provide for both you and your family.
In the event of disability, life insurance can provide you with much-needed income to support yourself for the rest of your life. In the event of your untimely death, either due to illness or injury, it will provide your loved ones with money to care for themselves and fulfill your final wishes. In short, it’s a last-resort protection against what we can’t control in life.
When Should You Get Life Insurance?
Determine whether you need life insurance now with a quick review of your personal circumstances. Score at least one point for each of the following questions.
Do you or are you:
- A Parent
- Owner of a home
- Owner of property
- Owner of a business
If you score even one point or higher, you should have life insurance. There’s a common misconception that single young people should not have insurance; this simply isn’t true. Even if you’re single, you still have loved ones and you still may need to support yourself if you become disabled. For the other categories, life insurance provides much-needed funds to handle affairs after tragedy strikes.
How Much Insurance Do You Need?
Generally, the more insurance you have, the better. But higher levels of insurance can be very costly, so it’s isn’t always wise to just take the best you can get. Ideally, you should find a balance between cost and features that makes sense for your budget and your needs.
Ask yourself the following questions:
- How much debt do you owe right now?
- What would it cost to pay off all debts?
- Do you owe a mortgage? If so, how much?
- How much would your loved ones need for funeral expenses?
- Have you at least $100,000 for your child’s education (per child)?
- How much would it cost your parent/ex-spouse to raise your child?
- How old are you? What yearly income would you like to achieve until end of life?
These questions are simple, but the next few questions don’t have specific numbers, and thus, can be more philosophical than specific. How much do you value the childcare your spouse provides? If you were to pass away, what “value” would your now-missing role have in the household? Keep in mind that both spouses and/or partners should be covered at all times. Consider that the average cost to raise a child is around $233,000 as of just a few years past.
Which Type of Insurance Do You Need?
For most people, term life insurance is best. Rather than covering you until end-of-life, term insurance provides a set amount of time within which you are covered — generally until around age 65. Because it ends, unlike whole life insurance, you are much less likely to need to file a claim at any point. Thus, you represent less of a risk to the company. Term life insurance policies are also more affordable, and may even be scalable so you can increase your coverage as you age.
There are some situations where term life isn’t advised. If you’re older, if you have no family, or if you still have very few personal assets, your main concern is coverage that provides income protection or expense coverage after your death. Additionally, creditors see whole life insurance as an investment product, meaning you can borrow from it and use it as an asset throughout life.