While there are tons of reasons to purchase life insurance, here are nine specific instances where we believe people MUST protect themselves and their families with a good policy. Having a life insurance plan is one of the best purchases that you can ever make for your family. Every year we get a lot of questions about life insurance and if a client should purchase a plan. There are several key reasons that you should consider purchasing a plan.
- You Have A New Born
Having a child who’s dependent on your income to survive is one of the leading factors in the need for life insurance. This specific need for life insurance coverage is referred to as income replacement, or survivor income. According to the U.S. Department of Agriculture, it will take roughly $240,000 to raise a single child from birth to age 18. This figure does not take into account the families who school their children privately or intend to send their children off to college.The loss of a parent or guardian can be one of the most difficult ordeals to deal with in life. The emotional strain experienced by such an ordeal can be devastating to children and young adults. For too many families, an untimely death also brings much financial stress, making the grieving and recovery period all the more difficult.Having adequate life insurance can ensure that your child’s living guardian will have the financial means to raise them till adult hood.
- You Just Got Married or Remarried
For most individuals or couples, the joyous act of getting hitched brings about the beginnings of consideration into the need for life insurance coverage. This is natural as joining lives together brings about some shared financial dependence where a need for income protection is justified through life insurance. Most importantly, getting married usually leads to discussions of growing a family which multiplies the inherent need for obtaining life insurance.Another sign pointing to the need for additional life insurance can come from the act of divorce as well as remarriage. We’ve had instances with clients who were in the divorce process where the purchase of life Insurance on each parent was mandated in the divorce agreement, in order to provide financial support for the surviving parent of the child.
- You Just Received A Raise or Promotion
Life insurance is most often purchased to provide income protection for surviving family members. Considering an individual’s annual income is usually tied to their jobs salary, receiving a raise or promotion is a clear indicator that additional life insurance may be justified to supplement the increase in your pay. A simple rule of thumb is that a parent or guardian should have 10 times their annual income in life insurance coverage to aid in the support of their spouse and dependent children moving forward.
- You Bought A New Home
So you just bought a new home and now your family has this pesky mortgage they have to cover each month. Now, to you, you’ve just acquired what most people would call their greatest asset, their home. However, in reality, your family’s greatest asset is the income provided by those who support the family financially.Without life insurance to provide income replacement of the deceased parent or spouse, the likely hood of your family having to sell their home and uproot the family to make ends meet is greater than ever.When purchasing life insurance, I like to recommend that my clients consider adding the balance of their mortgage to the baseline figure of 10 times their annual salary. This methodology allows for enough life insurance for your family to pay off the family’s home mortgage, so they can live free in clear in their home. It also provides your survivors with an equivalent of 10 years’ of your salary to help with supporting and maintaining your family’s standard of living moving forward.If you happen to already own life insurance but want to purchase additional coverage equivalent to the balance of your mortgage you can absolutely do that. Mortgage Protection Life Insurance is life insurance designed to have a decreasing death benefit that goes down each year as you continue to chip away at your mortgage payment. The benefit of having a decreasing death benefit is that it makes the life insurance policy is less expensive and therefore more affordable. Or you can just buy a regular life insurance policy with a level death benefit; it’s completely up to you.
- You Have A Special Needs Child
Going back above to warning sign one that you may need additional life insurance, we learned that according to the U.S. Department of Agriculture, it will take roughly $240,000 to raise a child from birth to age 18. That doesn’t however take into account the cost of raising a child with special needs. According to Mint.com, for a special needs child, those expenses can quadruple. The costs however, to raise a special needs child can vary dramatically depending on the disability and severity.
- You Started A New Business Partnership
Life insurance is most often associated with the need for family income protection. The truth is, life insurance plays a rather large role when it comes to business, particularly partnerships.Life insurance Buy-Sell Agreements are imperative when it comes to business partnerships. What this overlooked type of life insurance arrangement does is creates an agreement between the business owners. Should one of them pass-away, the life insurance settlement will be used to buy-out the deceased partners family from their interest in the business. This allows for the transfer of the business to the surviving owner to occur more smoothly. It also provides the surviving family members with a payment of funds from the life insurance payout that equals the agreed upon valuation of the business as detailed in the buy-sell agreement.Another important use for life insurance in the world of business is to provide life insurance coverage on a critical member or employee of a business. This type of coverage is called Key-Person Life Insurance. Should a critical member of your business pass-way (a Key-Person) it provides a life insurance payout to the corporation that can be used to hire another competent employee who can take that individuals place. This aids the business in lessening the impact on corporate productivity when losing a key-employee.
- You Are Taking Your Children’s (Or Grand Kids) Education Into Consideration
More and more I’m hearing from clients who want to take their grandchildren into consideration when researching their need for life insurance. One of the largest considerations for parents regarding life insurance is to provide or create an education fund for their children should they pass-away prematurely.Included in that is their anticipation of potentially creating an education fund for their grandchildren as well. With the cost of education increasing each year, and the enrollment rate of young adults in colleges increasing as well, the need for life insurance to potentially create an education fund for surviving family academics is becoming increasingly important every year that passes.
- You’d Like To Leave A Donation To A Charity Or Religious Organization
Using life insurance to leave money for a charity or religious organization is becoming increasingly popular. Life insurance can be an excellent tool for leaving charitable gifts. Via a relatively small annual cost (the premium), a benefit far greater and larger than what would have otherwise been possible, can be provided to charity. In addition, the premium can be arranged in such a way that it’s tax deductible. Most importantly, the charitable gift can be made without the need to dilute the estate you leave behind to your heir’s.
- You’re Interested In Leaving A Legacy For Your Heirs
Although life insurance is most often purchased for the need of protecting your family financially while you still have dependents. Life insurance is a great way to leave a lasting legacy for your heirs. With permanent life insurance such as universal life or whole life, you can hold onto a life insurance policy well into your senior years.This will allow the life insurance settlement left behind for your family to potentially impact family generations for decades to come. With life expectancy increasing each year, your life insurance benefit has the potential to reach and impact your great-grandchildren and even your great-great-grandchildren! Imagine if upon your passing you made able the creation of an education fund for your great-great-grandchildren or helped to pay off a family member’s mortgage. The type of impact you could have on your family is immeasurable with the use of life insurance.
Still confused as to how much life insurance you need? Get more information on our page for determining your needed amount of life insurance. If you have any questions at all regarding life insurance or what you’ve read here today, or if you are interested in acquiring a life insurance quote please don’t hesitate to give us a call or fill out he contact form on this page.
We know that shopping for life insurance coverage can be a long and difficult process. Nobody wants to think about his or her own death, but it’s vital that your family has the coverage that they need. It’s one of the best ways to ensure that your loved ones have the money that they need, regardless of what happens to you.
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