November 27, 2021
  • November 27, 2021

Do i need life insurance?

By on October 26, 2021 0

By Haley Tolitsky, CFP

September was Life Insurance Awareness Month, but it’s not too late to protect yourself and loved ones before the end of the year. Thinking about death is neither easy nor fun, but it is important. A common misconception, especially among young people, is that you don’t need life insurance or that it is too expensive. If someone in your life is relying on you financially, you probably need life insurance, and the good news is, it probably costs less than you think.

Haley Tolitsky

This article deals only with term life insurance. Beware of any salesperson who tries to sell you a whole or permanent life insurance policy (life insurance with cash value) as this product is usually very expensive and unnecessary for most people. Always do your research!

How do I know if I need life insurance?

Term life insurance provides a tax-free (cash) death benefit to your named beneficiary (ies) when you die. This could be your spouse, children, an elderly parent, etc. If a family member is supported by your income, you probably need to have a policy to protect them. If you died, the death benefit paid to your beneficiary would be used to cover immediate and future expenses. Other signs that you need life insurance include:

  • You have minor children. Life insurance could help cover their expenses, such as groceries, daycare, and education. While stay-at-home parents may not have an income, consider the costs of their household chores and babysitting duties that would be expensive to provide if they weren’t there.
  • You have debts. The co-signers and co-owners of your mortgage, student loans, and other loans would be responsible for your debt if you died.
  • To cover the cost of your funeral. It lightens the burden on your loved ones.
  • You own a business with a partner and / or employees.

What coverage should I have?

When applying for life insurance, you will need to choose the amount of death benefit your beneficiary would receive and the duration, that is, how long the policy is active (often 10, 20, or 30 years). To help you determine the appropriate death benefit, think about how much money your loved ones would need to cover their living expenses and for how many years. Also consider any outstanding debt that needs to be paid off, including your mortgage, private student loans, credit cards, and car loans. If you have kids, don’t forget the cost of child care and college education.

When choosing the term, consider how long your family would need the full death benefit. Many choose the end of the term once their children are out of college and can support themselves, their mortgage is paid off, and / or the surviving spouse can live off their savings and investments.

You can also ‘stack’ life insurance, which means you buy two policies: one with a higher death benefit and shorter term to cover current debts and the family’s lifestyle, and another with a lower but longer term death benefit to lock in your low premium. Take a look at this example:

Tolitsky - Benefits of life insurance

How can I apply?

It is usually a fairly quick and easy process to purchase life insurance. You can do this online or through a life insurance agent. You will complete an application that asks for your medical history and you may need to have a brief medical exam. Then the request will go through the subscription, where the company reviews your case. Once approved, you will sign the policy and pay the premium, which will put the policy into effect.

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Helpful Tips

Remember, the younger and healthier you are, the cheaper your life insurance policy will be. Once your term expires the policy is no longer valid and if you still need life insurance you will need to reapply based on your new age and health condition and face a premium. higher annual. It may be beneficial to lock in your low cost premium in the long term (20-30 years) while you are young and healthy.

As a rule of thumb, six to ten times your annual salary is an acceptable amount of life insurance, but don’t forget your kids and your debts. Use an online life insurance needs calculator to help you determine how much coverage you should apply for.

Always indicate a potential beneficiary. The death benefit will go to your contingent beneficiary if your primary beneficiary is deceased. Review your beneficiaries every year because they are overriding your will! The last thing you want your death benefit to go to the wrong person.

Many employers offer group term life insurance as a workplace benefit. This is great because it’s usually inexpensive or free, but there are a few drawbacks including insufficient coverage, potential loss of coverage if you leave your employer and the death benefit is often taxable to the beneficiary. You should accept the free or inexpensive insurance offered by your employer, but consider purchasing your own individual term life insurance policy for additional protection.

Shop around to make sure you’re paying a reasonable premium from a reputable life insurance company, and set up automatic payments if you can to make sure you don’t miss a payment and lose coverage.

About the Author: Haley Tolitsky, CFP®

Haley Tolitsky, CFP®, is a CERTIFIED FINANCIAL PLANNER ™ with Cooke Capital in Wilmington, North Carolina, providing highly personalized financial planning and investment management services. She is passionate about financial empowerment, especially for women and the next generation, and enjoys the opportunity to motivate and guide others to take charge of their financial lives. Haley can be contacted at [email protected]

Securities offered through The Strategic Financial Alliance, Inc. (SFA), FINRA member, SIPC. Advisory services offered by Allegiance Financial Group Advisory Services, LLC (AFGAS). SFA, AFGAS and Cooke Capital, Inc. are not affiliated. Supervision office 703-242-7900.

Do you have questions about your taxes, your personal finances and your investments? Get answers!

Email Jeffrey Levine, CPA / PFS, Director of Planning at Buckingham Wealth Partners, at: [email protected]

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