There comes a time in every person’s life where they have to ask themselves if it’s finally time to invest in life insurance. While there are numerous factors involved in making that decision, there are some instances in which you should absolutely ensure that you’re covered.
When Should you Absolutely Have Life Insurance?
The basic answer is – when you have a serious partner, a child, or dependants who rely on you/your income to survive. This also applies if there’s anyone else in your family who relies on you to stay afloat. In the case of children, you’ll want to make sure you have enough to cover not just their living expenses but also their education.
Another time in your life when it’s important to seriously consider getting life insurance is when you become a new homeowner. Should you pass away, will you still be carrying a mortgage and how will that be paid off? Are you willing to saddle your partner or children with that debt? If there’s a transfer of property involved after your death, life insurance can also play a beneficial role in assisting with the taxes that would need to be paid.
What Should your Insurance Cover?
The main goal is to ensure that every financial essential is covered so you don’t have to worry about leaving your family in debt.
Here are some of the points you should definitely ensure are taken care of:
- Income substitution
- Post-secondary education for your children
- Loans being paid off (mortgage, car loan, line of credit, credit card, student debt etc)
- Other costs associated with your death (funeral, cremation, etc)
When you have kids, this list becomes even longer and includes things like dental and eye care coverage as well as any other health care not covered by the government, groceries, new clothes, child care services, housing arrangements and transportation.
What Types of Life Insurance are Available?
There are three types of insurance you can opt into, with term life being the cheapest and easiest to understand. The other two options are universal life (which serves as both life insurance and an investment) and whole life (the most complex option also combining insurance and investment but with less flexibility than the other two options).
Most people tend to opt into term life coverage. You choose a set insurance coverage term (typically 10 or 20 years but it’s up to you. If you’re a parent, for instance, you can choose to ensure your children are covered until they’re legal adults and beyond) and pay a set, reasonable fee. Term life does not accrue like the other two investment options but it’s also the most affordable and simplest option.
That’s not to discount the other options. There are valid reasons to go for universal or whole life insurance but it’s very important to do your research first and see what option works best for your family and for you budget.