With college graduation behind you and the excitement of starting a career, the subject of life insurance may have been pushed to the back burner. While life insurance is an important part of providing financial protection for most people, young consumers may be confused about many aspects of the process, including when to purchase a policy and how much coverage they really need. If you are among this group of young consumers, here are some tips that will help you make good decisions about life insurance protection.
Single people may not need a large policy
Life insurance coverage is meant to be used as a tool to support the financial needs of those left behind in the event of your death. Single people who have no dependents or debt that will survive them may not need life insurance coverage. Instead, they may only need to purchase a small policy sufficient to cover the costs of their funeral arrangements and focus on other investments instead of paying the premiums for life insurance coverage.
Coverage amounts should be determined by cost of replacement
Consumers who are in the market to purchase life insurance may find it difficult to decide how much coverage they need. A simple way to overcome this problem is simply to determine how much annual income your family will lose when you die and them multiply that figure by a multiple of at least ten. A spouse that relies on your income can choose an investment strategy for the proceeds from your life insurance policy to provide sufficient interest income to insure that they will be able to continue their current lifestyle after your death.
For example, a young husband or wife who earns $80,000 could choose to purchase life insurance coverage of at least $800,000. If one spouse does not earn an income due to caring for children or the home, their life insurance needs can be figured in the same manner. For instance, if the surviving spouse would need to hire childcare, cleaning and other services totaling $50,000 per year to replace their contribution to the family, then the minimum amount of life insurance coverage needed on the non-working spouse would be at least ten times that amount, or a half-million dollars.
Additional questions you will need to discuss concerning the purchase of life insurance is whether to purchase term coverage or universal life and how to set up trusts for minor children. To get the answers you need to all your life insurance questions, contact an insurance agent, such as Jack Brier, to schedule a confidential meeting soon.
Have you done everything possible to prepare for your family after you pass away? So many of us think that there is always more time to take out a life insurance policy or think that we cannot afford one. What we fail to remember is that there may not be a tomorrow. If you were to pass away today in a tragic accident, would your family be able to survive? Would your family be able to continue living in your home? I started working on this blog after I went to a friend's funeral. It was that moment that I realized that I wasn't ready for death and that if it was to happen at that time, my family would struggle to survive.