Life insurance is one of the most misunderstood elements of a solid financial plan. While most people understand that saving for retirement, investing for educational needs, and having a will and a medical directive are all important aspects of building a secure financial future, the importance of having life insurance is often overlooked.
Here are five points to consider when deciding to purchase life insurance:
No matter your marital or parental status, life insurance is important
Even if you’re single, with no dependents, there will be final costs related to your passing. Life insurance can provide the funds to cover those expenses and relieve your heirs of that burden. Those funds can also allow you to leave a legacy to loved ones and/or a favorite charity.
Should you have a spouse and/or children, a life insurance policy can provide for their secure future, allowing them to stay in their home and pursue their education.
Life Insurance is not a luxury; it’s likely less expensive than you think
There are multiple types and sizes of life insurance available, from term to whole-life policies to policies that fund a trust. The cost is dependent on several factors, including your health, your income, how much debt you’re carrying, and who and what you want to cover with the policy.
The younger you are when you purchase your policy, the less expensive it will be. You can always purchase additional coverage as your needs change.
Your employer-provided life insurance is not portable or flexible
If you are fortunate enough to have an employer who provides life insurance as a benefit, congratulations. However, that coverage should not preclude you from purchasing a policy on your own. Very few people stay with the same company throughout their careers. Should you leave your job, most company-sponsored policies are not portable and their benefits are not flexible.
As mentioned above, if you change jobs in middle age, purchasing a new policy will be much more expensive than if you had done so ten or twenty years prior.
You are a full-time parent so you don’t need life insurance
There have been numerous studies done that show the “replacement cost” of a stay-at-home parent; it’s staggering. In addition to dealing with their loss and grief, your family would need to hire childcare, housekeeping services including cleaning and shopping, and family transportation. A full-time parent’s contribution to the family is very valuable.
I’m about to retire, my family is doing well. I no longer need life insurance
Maintaining your life insurance after retirement can be a wise move. Depending on the policy, you may be able to access its “living benefits” in case of emergency or to cover unexpected medical expenses such as long-term care or a terminal illness.
And that policy you’ve paid into for years can also fund a legacy for your loved ones. Most insurance payouts are not considered gross income and are therefore not taxed.
Seek professional financial advice when making important decisions
Your One Financial Services team is always here to provide information and guidance to help you toward a secure financial future for you and your family.