Sometimes we don’t like to talk about the hard stuff, myself included but its so necessary to have a plan in place!
If you have children or any loved ones that need to be taken care of financially when you pass away, then life insurance coverage can be really important. A life insurance plan is a policy that will pay a specific amount of money that is given to a specified beneficiary upon the death of the policyholder.
The beneficiary or beneficiaries (usually the children) will receive the money and it can be used for anything they might need in the future including, for example, their first home purchase.
What Kind of Life Insurance Do You Need?
There are different life insurance policies, but the two most popular are called: Term Life and Whole Life Insurance, which is also known as Permanent Life Insurance.
1. A Term Life Policy
A Term life policy will cover you for a specified time frame or term and typically will range from a 10 to 30 year period. If you were to pass away within that time, your beneficiaries will receive a payment (tax-free) in the amount of money that you had chosen when buying the policy.
For example, if you have children, you can decide when your kids might need the money the most in their lives. Or if you are single without kids, you might want enough coverage that can help pay for any mortgages or other debts that might be outstanding.
2. A Whole Life Policy
A permanent (or whole) life insurance policy will allow payment to your designated beneficiaries whenever you pass and not within a certain term. Permanent policies are much more expensive and not necessary for young families.
Why Parents Should Consider Life Insurance
A few questions might help determine why parents should consider life insurance:
Does anyone in your family, namely your spouse, rely on your income? This could also be an aging parent, a child, or even someone that co-signed a loan.
A life insurance policy replaces the financial support that you would give to your kids when you are no longer here to support them.
Parents with younger kids should consider life insurance
Your kids, particularly at a young age, might depend on you for years. You might want to save for their future college tuition, another type of schooling, or general expenses they might need. Unless you already have your entire life savings set (and who does?), a life insurance policy can help fill in the financial gap if you are no longer here to help.
How much life insurance will you need?
The best way to figure out the amount of life insurance you need is to try to add up all the money and sources from which your kids might eventually have monetary income coming to them. The number could be low such as $45,000 but the policy should be 10 times that amount or $450,000.
Think about your kids, your own financial situation, and determine if a life insurance policy will help you in the future. There are many reputable companies out there so if you figure out what you might need and talk to a few companies, you can then decide if a life insurance policy will help you and your kids.