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LIFE INSURANCE: WHAT YOU NEED TO KNOW
Sometimes, getting to a good place with your finances means thinking about things you’d rather ignore. Like, well, death. And what will happen with your finances once you’re gone. But it’s an eventuality that everyone has to consider, especially where our family, business and other dependents are concerned — and that’s where life insurance comes in.
What is life insurance, exactly?
Life insurance is insurance that hinges on either the death of the insured, or the end of a set period of time. It’s designed to ensure that the people who relied on you in life will be OK after you’re gone, and that your financial obligations don’t become someone else’s burden.
Life insurance comes in several different flavors. These are the main three:
Do I actually need life insurance?
By now you might be thinking, “This seems more complicated than I have the bandwidth for. Do I really need this? Can it wait?” I get it: It can definitely be overwhelming (and discouraging) to deal with a future financial hypothetical, especially one that you won’t be around for!
But if any of these criteria apply to you, it’s definitely worth considering.
Basically, life insurance can cover pretty much anything that you might want or need to pay for in the event of your death. It’s a way of clearing your balance(s) for others, and of ensuring the people who care about you can mourn your loss without having to also worry about the money part.
How much life insurance should I get?
A good rule of thumb for estimating how much coverage you need is to:
If it turns out to be unaffordable, you can buy what you can afford now to lock in a good rate. You can buy more later, just be aware that several years from now your rate will be based on your older age and any health conditions you’ve developed.
How do I choose a life insurance policy? What should I be looking for?
As with any insurance, choosing a life insurance policy can be fraught. There are a lot of options out there, with different criteria and rules to contend with. We wish we could tell there is a one size fits all but there isn’t. The best way to determine what type to add to your financial planning is consulting with a financial planner. We typically ask our clients their philosophy on death and what they wish to protect the most in their absence. Below are some questions we typically ask to help guide our clients:
These are important questions to ask yourself, discuss with your life partner or business partner.
*In January 2021, LIMRA and Life Happens engaged an online panel to survey adult consumers who are financial decision makersin their households. The survey generated over 3,000 responses. The results were weighted to represent the U.S. population.