Let’s establish something right away – if you have kids, you need life insurance. Even if you don’t have children, you should have some sort of small life insurance policy to cover the cost of your services and last wishes when you do pass. Dying without any sort of insurance often means leaving the burden of a memorial service and funeral on those left behind – those who cared about you most.

Why Life Insurance?

Morbid funeral costs aside, you need life insurance for another reason as well, especially if you have children or other dependents. Right now you’re providing for your children presumably. Your spouse may be providing income as well. What would happen if you suddenly were gone tomorrow? First your spouse would be devastated and your children shattered, but emotions aside, the cold hard facts of death are almost as bleak.

Funeral costs, including cremation options, are easily in the thousands. A funeral can easily cost well over $20,000.

Without your income, your spouse is not responsible not only for any debt that is in both of your names like your home, cars and potentially credit cards, but for supporting the family as well. If your car is relatively new when you pass, you may owe more on the loan than the car is worth, making it expensive to get rid of – if your partner can even handle that emotionally in the near future.

If you were making $50,000 before your death and your partner was making $40,000, your family is now trying to live a $90,000 on $40,000 per year. Short of certain survivor benefits, your family doesn’t get a paycheck if you’re dead and not at work.

Even if your partner was staying home and able to go back to work, he or she is now responsible for paying for additional childcare and the other expenses of work, making the new income cover much less than you might expect, especially if your children are young.

So, if you’re not already convinced, life insurance is essential, and the more money you make and the more expensive your lifestyle, the more insurance you should have.

Term Life Insurance

The most popular form of life insurance is term life insurance. It’s much like renting a life insurance policy for a set amount of time. You might get a 30-year term policy and pay monthly premiums. This policy would pay out so long as you died while still paying premiums. If you were to die in year 31, the policy would no longer be in effect and there would be no benefit.

Generally term policies are preferred for those in their working years, especially those on a tighter budget. Term life policies are less expensive after all. They can also be extended or renewed if you’re concerned about additional coverage as you age. Generally, however, your need for life insurance will decrease as you age, your children grow up and move on and your lifestyle becomes less expensive overall.

Whole Life Insurance

While whole life insurance policies are certainly an option available to all individuals, they are generally not preferred for young families. Whole life insurance policies have a set amount of benefit that you’re earning as you make payments. The whole life insurance is also a sort of savings vehicle, although it accumulates almost no interest with the heavy burden of fees and low interest rates.

Whole life policies have their place with older individuals looking to pass down significant amounts of wealth and older families with more money to invest in these policies may consider them a wise investment as well as the value is steady and accumulates, unlike term insurance policies. Most of the time, however, those in their prime working years do well to spend less money on term insurance and invest extra money in other areas where a return on investment is much more assured.

Your Personal Action Plan

With this information in mind, you should review your own insurance position. Some individuals are insured through work already, but may need to extend coverage. Others may need to reevaluate their insurance plans to be sure they have the right amount of coverage through a company offering a fair premium – prices can differ dramatically from one company to the next and depending on your health conditions.

Finally, share the details of your life insurance policies and other areas of your estate planning – small as it might be – with those close to you so that others can find these policies when the time is right and emotions are running high.

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