Life Insurance: Do I Need It?

A life insurance policy is one of those seemingly irrational purchases, in that it’s only useful if you die and in that case, you won’t ever benefit from it. But if you ask anyone if they think a life insurance policy is a necessity item, they will almost always answer yes. So why is this? Are you struggling to pay your monthly bills and wondering if expensive life insurance premiums are really worth it?

A life insurance policy is probably the best gift you can give to your loved ones. If you die unexpectedly, your sudden loss of income won’t send your family into a financial crisis and they won’t have to deal with financial burdens on top of having to cope with your death.

These are not comfortable thoughts – no one likes to think about death, especially their own. But everybody does die and that’s why everybody ultimately wants a good life insurance policy. It will give you peace of mind during your life and keep your loved ones financially secure after it.

A child doesn’t need life insurance – he has no dependents. But a 40-yr-old man who supports a wife and three children certainly does need life insurance. After all, if he dies before he turns 50, or 60 for that matter, his dependents could end up in awful shape, financially-speaking. But that’s not entirely true. If he has a life insurance policy, that won’t be the case.

So the answer to the question “do I need a life insurance policy?” is probably yes, but the answer to the question “how much life insurance coverage do I need?” is different for everyone. There are some basic factors you can consider to determine if you are a candidate for a permanent, whole life insurance policy or perhaps could benefit from a more affordable term life insurance policy.

Here is a checklist for determining the extent of coverage that you need from a life insurance policy:

What kind of expenses will your dependents have to deal with in the event of your death? (There will likely be medical bills, debts perhaps, and funeral expenses.)

Will you leave behind a spouse who will need another income or funds for retirement?

Will you have a mortgage that will be need to be paid off?

Will you leave behind children who need an education?

These are not fun questions to answer, but they are very important and you should deeply consider them. If you are single or elderly, your need for a life insurance policy is probably not great – as you likely don’t have many, or any, dependents. Remember, a life insurance policy does not benefit you; it is for your loved ones. So their needs will determine how much life insurance coverage you ought to obtain.

There is a small exception to this, however, as some insurance plans also offer disability benefits so that in the event you become disabled before the age of 60 or 65, you can have your premium waved and/or gain a disability income.

Your next step is to find the specific type of coverage you are interested in and then compare quotes. The web is a great way to begin shopping but you will eventually need to sit down with an insurance agent or two and talk to them about your personal financial situation.