Are you hesitant about life insurance?This article shows you how to decide whether you really need life insurance, and how to make decisions in different roles at different times in your life.
American Life Insurance Guide > Life Insurance Academy > Do I need life insurance?
Life is calm on the one hand, but always unexpected on the other hand-there are as many twists and turns in life, there are as many reasons to buy life insurance.But not everyone needs life insurance.The editor of the Life Insurance Academy will help you figure out if you really need life insurance – and when you should get life insurance.
In this article, we will introduce:
- Who needs life insurance
- At what age to buy life insurance
- Who does not need life insurance
- Does the law require life insurance when divorcing?
Who needs life insurance?
The simplest rule of thumb to determine if you need life insurance is:Does anyone rely on your income to protect their financial situation?
This person may be a child, a spouse, or an elderly parent, or even the person who undertakes the student loan together-if you have not paid off the debt as a joint debtor, the other party will be in trouble.
If the answer above is yes, then you may need life insurance.
The role of life insurance is that when you do not have the ability to continue to provide financial support, life insurance will replace you to provide financial support to others.People usually think that they need life insurance in the following situations:
Parents with children
Your children will rely on you for many years. You may also wish to prepare a savings plan for their future college tuition and other important life time. You may even say that you just don't want your significant other to worry about your children's daily expenses.In this case, unless you already have enough savings to support everything they need, once you die, the family loses its financial resources.
Couple
If your loan or loan requires two people to pay together, or mainly rely on your significant other's income to support the current lifestyle of you or your family, then life insurance can ensure that you are financially protected anyway.
Student
Although said that if the borrower dies, the federal student loan will be forgiven.However, this is not the case with private student loans. Usually, the debt will be transferred to the co-signing or guarantor – usually the parents.In this state, it is very likely that the parents will find it difficult to take out a sum of money to repay the loan.If the amount of student loans is large enough to become a serious burden, such students can consider life insurance in advance to protect the guarantor from debts.In addition, as we will introduce later, the earlier you apply for life insurance, the lower the insurance cost, and the ability to lock in premiums from increasing with age.
In the following cases, you do not necessarily need life insurance, but applicants for life insurance may benefit from it:
Business owner/operator
In addition to family members, those who do business in partnership may wish to set up partners as beneficiaries.If the company or business cannot operate without key members, it is a good choice to apply for life insurance for them.In addition, the death compensation can be used to enter into a sale and purchase agreement to provide financial support for the partners to purchase the remaining shares from the deceased’s home.
The rich
If you expect to leave enough inheritance at the time of death that you will generate a large amount of estate tax and become the pressure of the heirs, then you may consider using life insurance with cash value functions (such as lifetime) Transfer funds to your heirs to pay high taxes.If you are in this situation, it is recommended that you should consult a financial adviser about estate planning matters. (The U.S. tax reform in 2018 made this situation even more complicated. By 2025, the inheritance tax exemption for spouses and families will be increased from $1120 million to $2200 million.)
At what age should you buy life insurance?
Whether it is the role of "parents" or "students" and "husbands and wives", the need for life insurance will not remain the same.Sometimes, the need for life insurance will gradually disappear. For example, the children will grow up and move out to be independent; you and your partner will eventually pay off the house, car or other loans; you will pay off the student loan.At those times, you may not need any insurance.
For most people in life, term life insurance is a good choice.Term life insurance is valid for a certain number of years, which is called Term.When the period ends, the policy is declared to expire.Although you may want the insurance to last a lifetime, most people are better off buying a reasonably priced term life insurance policy and investing their savings separately, rather than applying for a relatively expensive and more complicated whole life life policy.
There is another question here, that is, even if you know that you want to apply for life insurance, what age is more appropriate to apply for?Do I need life insurance when I am 25, 35 or 45 years old?The simple answer is: it depends on what happens in your life.But remember:
- Life insurance premiums become more expensive with age.For each year of waiting, the expected life insurance costs may rise by 8-10%.When the life insurance holder has passed a certain number of years, your monthly premium rate will not change, but if you buy a 45-year policy when you are 20 years old, it will be equivalent to buying one when you are 35 years old. Life insurance for death compensation pays more than twice the price.
- It is expensive to hold life insurance for too long.Although buying life insurance for $25 is definitely cheaper than $45, but if you buy it in the future, you may not need insurance, which may make the cost even lower.
You might think that it is cheaper to pay $20 a month for 30 years than to pay $10 a month for 60 years?But in fact, they are actually the same.
Applying for life insurance when you are young can guarantee a relatively low cost over a longer period of time.But if you do not need life insurance, it is not necessary to apply for life insurance prematurely.Our suggestion is to repeat again the judgment criteria put forward at the beginning of this article on the American Life Insurance Guide: As long as you haveThe need for protection, You should buy it now – As long as someone depends on your income – This is the number of years that you can estimate that they will need to rely on you, and then you can estimate the fixed number of years.In this way, you can avoid unnecessary expenses and at the same time lock in the cheapest life insurance price based on the exact time.
- Elderly retired people.For the elderly who are worried about the funeral expenses after death and (small) outstanding debts and other late-life expenses, end-of-life life insurance or guaranteed life insurance may be a solution.
Who does not need life insurance
Not everyone needs life insurance, even if they play an important role in family life.Remember the judgment criteria we introduced?Here are some examples of people who may not need term life insurance products:
Couple staying at home For working family couples, term life insurance products provide unexpected payment capabilities, but couples who stay at home do not necessarily need such term life insurance.This is not to say that the spouse staying at home does not contribute to the family – in fact, it is more reasonable to apply for a small insurance policy to cover day care and other expenses after the unfortunate death of the couple who stayed at home.The design time of this policy will be shorter than that of a general policy-for example, it is sufficient to wait until the child reaches school age.In this case, some insurance companies may not even be willing to sell you a larger policy.
retired people Ideally, when you reach retirement age, your need for life insurance has faded: your children are already independent, and you have paid off your debts. Even if you die, your family and friends around you will not fall into it. Dilemma.Once you are financially free and clear, there is no need for life insurance.You can even ensure this again by saving.But if you want to leave an inheritance, you may best consider investing in life insurance.
child Many life insurance companies provide insurance riders to protect your children.And some insurance brokers may even try to sell you one, but usually do not recommend it.Children have no income and do not need to support their families, so they may not need life insurance.
Keep in mind that this is not to say that none of the characters in the above scenes absolutely need life insurance.Should we consider specific circumstances in light of personal circumstances, such as investment purposes, protection purposes, or other purposes?However, it is important to consider whether life insurance is really necessary.
Does the law require life insurance when divorcing?
In most cases, life insurance is not a mandatory purchase, which is different from auto insurance and health insurance.However, some states may require separated spouses to purchase life insurance and will set each other as death benefit beneficiaries to ensure the living conditions of their children under any circumstances.The life insurance rules required by court orders vary from state to state. If you find yourself in this situation, you must consult a legal professional.
Calculate your insurance coverage requirements
Once you have confirmed that you need life insurance, the next step is accuracyCalculate the amount of insurance you need.Before you sign a contract with a life insurance company, you can communicate with life insurance brokers and financial planners to understand how life insurance can meet your financial needs.
Click to understandHow to calculate the amount of insurance you need
American Life Insurance Guide > Life Insurance Academy > Do I need life insurance?
