Do I Need Life Insurance?
One question I often receive from clients, prospects, friends and family members is around life insurance. They ask do I need it and if so, how much do I need?
More than one-third (35 percent) of married couples with dependent children want to speak with a financial professional about their life insurance needs – Facts About Life LIMRA
Life insurance is a way to protect your loved ones financially after you die and your income stops. The answer to whether you need life insurance depends on your personal and financial circumstances. As a general rule, you might consider buying life insurance if one or more of the following is true:
You have children
You are married and your spouse depends on your income
You have an aging parent or disabled relative who depends on you for support
You have a large estate and expect to owe estate taxes
Your retirement savings and pension won't be enough for your spouse to live on
You own a business, especially if you have one or multiple business partners
You have a substantial joint financial obligation for which another person would be legally responsible after your death (most common debt in this case is a mortgage, but there many others)
Six in 10 say they don’t know what to buy or how much they need. One of the biggest obstacles is lack of information (up 23 percent from 2010). – Facts About Life LIMRA
As an independent firm I shop the major life insurance carriers to find an appropriate policy for your needs. You can see a term quote comparison of major carriers in a matter of seconds.
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In all of the cases listed, the proceeds from a life insurance policy can help your loved ones continue to manage financially. The proceeds can also be used to replace lost income, pay off mortgage and other debt, even to meet funeral and other final expenses, which can run into thousands of dollars. Life insurance can also be a very important component of one’s estate plan, depending upon ones wishes.
How much insurance is appropriate?
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A financial professional can help and there are numerous online tools that can help you get an idea of how much insurance you would need. With my clients, I use WealthVision, a financial planning program that incorporates a client’s estimated insurance needs into their financial plan alongside their other financial priorities. From here I compare quotes from major providers to determine what a fair cost estimate is. This estimate is then placed into the financial planning scenario which assists the client in making an educated decision. If you are interested in a needs analysis, email me.
The following questions can help you get a sense of how much insurance you might need.
What immediate financial expenses (e.g., debt repayment, funeral expenses) would your family face upon your death?
How much of your salary is devoted to current expenses and future needs?
How long would your dependents need support if you were to die tomorrow?
How much money would you want to leave for special situations upon your death, such as funding your children's education, gifts to charities, or an inheritance for your children?
Insurance, for the most part, is an expense. Client's often bring up that they feel insurance is a waste of money… “if I do not use it then it is a wasted expense”. If you feel that insurance is a waste of money or that you cannot afford it, that is totally fine. In this case, I would suggest you partially insure. If something were to happen to you, your loved ones will be extremely grateful that you did. There are also hybrid products available today that might fit your needs. I encourage you to explore with a trusted professional. Coverage might be more affordable than you think.
Many people believe coverage is more expensive than it is. On average, consumers estimate the cost of life insurance twice as high as the
actual price. - Facts from LIMRA Life Insurance Awareness Month, September 2015
Once you have a life insurance policy, make sure to periodically review your coverage. I incorporate an insurance review annually with each of my clients when we review their financial plan. Reviewing is especially important when you have a significant life event. The most common mistake that people make is to be under-insured, but it's also possible to over insure. In my opinion, this too is a big mistake; the extra money spent on premiums could be used for other things. Opportunity cost can become very expensive and can hurt ones long term financial health.
If you need help reviewing your coverage please feel free to email me at firstname.lastname@example.org
If you would like to learn more about my services, visit www.newpointewealth.com
Disclosure: This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent.