Who Needs Life Insurance? Do You Really Need Life Insurance? As I previously wrote about in my blog post, When is the best time to buy life insurance? The best time to buy life insurance is when you need it. If you need it, the best time to buy it is now. It’s human nature to procrastinate. You may get a term life insurance quote estimated to cost $35 a month for a $500,000 death benefit. But you may say to yourself, “I’ll wait until next year, when my car is paid off and I have more room in my budget to buy life insurance. I’m healthy now, and my agent says it will cost about the same if I buy it next year, so if I wait a year or two, I can save $420 a year by putting it off.” Some people use this type of thinking to keep avoiding buying the life insurance they need, until its too late.
Who Needs Life Insurance? Do You Really Need Life Insurance?
Surely you’ve been told you can be hit by a bus tomorrow. Many people have been told this, only to live their whole lives without being hit by a bus. But its not implausible. I jog in the morning, on city streets 6 days a week, and I depend on drivers seeing me, and not losing control of their cars, to avoid hitting me. Maybe you don’t jog on city streets, but I bet almost everyone reading this blog drives an automobile daily, or is frequently a passenger in a motor vehicle. You can be the best, safest driver in the world, but it only takes being in the wrong place at the wrong time once, to be the victim of a fatal car accident.
Likewise, your health can change on a dime, due to injury, genetics, or unknown environmental factors. Almost every life insurance agent has the story of a client putting off buying life insurance, developing a life-threatening illness out of the blue, making them uninsurable. If you need life insurance, the best time to buy it is immediately. But when do you really need life insurance? When you buy a house? When you get engaged? When you get married? When you have kids? The answer to when you need to buy life insurance will vary depending on the individual, but this blog post will explain things to consider, to help you decide when YOU really need life insurance, and help you avoid the costly situation of desperately needing it, but being unable to qualify for it.
Life insurance should be considered as a need, anytime money is required to avoid a financial burden on others, in the event of a person’s death.
For many people, the need for money is to replace the income of someone dying during their working years. If there is a couple living together, and each person brings home a paycheck, the loss of the income of one due to death, will affect the quality of life of the other. I think most people understand the need for life insurance to help a spouse taking care of dependent children, but even a working spouse or significant other without kids, may be at risk of not being able to afford the rent or mortgage.
Many popular personal finance advisors in the media, like Suze Orman & Dave Ramsey, think life insurance is useful ONLY for income replacement, to protect you during your working years, and recommend buying term life insurance only. Considering the core audience of these well-known advisors consists of people in debt, and in need of advice to help them manage their money, learn how to save & invest, & avoid bad spending habits, it’s good advice for the majority of their followers.
However, did you know Suze Orman owns a lot of permanent life insurance? Why doesn’t she take her own advice to only buy term life insurance? It’s because Suze, like a lot of very wealthy people, has a different need for a life insurance death benefit when she dies: she needs it for estate planning, wealth transfer, and to minimize the impact of the substantial cost of estate taxes.
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You don’t need to be wealthy to decide permanent life insurance is right for you. You may have a special needs child needing care his or her whole life, including after you die. Permanent life insurance is likely to be best for this need. Sometimes life insurance is more “wanted” than needed, to create an estate, or donation to a charity, cause, or institution, depending on the values of the person buying it, and the affordability of coverage. Even the “need” for life insurance can vary, depending on the values of the person buying it. One person in the exact same situation as another person, may wish to have enough life insurance coverage to pay for their kids’ college education, pay off the mortgage, and support their spouse for the rest of the spouse’s life, while the other person may wish to have only enough life insurance to replace their income for a 5-year or 10-year period of adjustment for their family.
To decide if you need life insurance now, think how the people you leave behind will be affected financially by your death. Also, consider what you want to happen to your assets. You may be a single homeowner, but do you want life insurance to pay off the mortgage and pass your home to a loved one?
Life insurance agents can help you decide on your life insurance needs, but be on your guard, because many agents will find some reason why everyone needs life insurance. If for no other reason, many agents will recommend life insurance to cover final expenses, like the cost of burial. If you are in your 50s or older, have no money in the bank, live paycheck to paycheck, a life insurance policy to cover final expenses might make sense for you. But for many people, a permanent life insurance policy with a small death benefit to cover the cost of a funeral is not worth it. Also, some life insurance agents recommend buying life insurance to pay off debt or a mortgage, no matter what your situation. If you are single homeowner, and don’t really care what happens to your property after you die, don’t let an agent convince you to buy life insurance, so a distant relative can own your home free and clear, unless both you and the relative want this to be the case.
However, its also likely a life insurance agent can help you uncover your real life insurance needs, you may have not considered or ignored. Many people don’t realize the full financial impact they have on the lives of the people around them. Nobody wants to think about their death, but taking some time to consider it and its financial repercussions, can help you continue to take care of your loved ones when you no longer alive to do it in person.
Remember, you can save a lot of money by shopping for lower auto & home insurance rates, and the savings can help you afford to buy the life insurance you need.
Have you purchased life insurance yet? If not, why? Tell me your thoughts & opinions. Comment on my facebook page. If you have questions and would like my help, you can reach me at help@smartshopyourcarinsurance.com. Follow me on Twitter for important insurance consumer news & new blog entries at CarInsWatch.