As we grow older, start families, build businesses of all sizes, one can quickly come to realize that life insurance is a fundamental part of any well formed financial plan. Most everyone is aware that they need life insurance, but experience shows time and time again that most people only think about purchasing it following an important life event that drives them to buy it. That all being said, there are some key benefits to purchasing earlier than later.
Why do you need life insurance?
Some of the first questions you should ask yourself when thinking about purchasing life insurance are:
If you were to die tomorrow, who would assume your debt? There are a number of liabilities that happen upon death that someone else will become responsible for. Outstanding debts and taxes may need to be paid for by your spouse, your kids, or your parents.
Do you have a family? Kids? Not having adequate life insurance could put your family at risk and leave them in a detrimental financial position.
Do you own a business? Having a business succession plan should you pass is an important part of business planning. If you are a business owner and do not have a succession plan you should speak to your financial advisor about relevant business insurance products and any additional documentation determining how your business assets and liabilities are inherited.
How much life insurance do you need?
Unfortunately, there isn't a "one-size-fits-all" solution to this. There are a number of variables that contribute to the amount of insurance that you may need. Factors such as health, age, lifestyle, number of kids, spouse, debt etc., all play into the amount of insurance that you may or may not need. It is important that you speak to a licensed advisor to determine the amount and type of insurance product that is right for you.
What type of insurance products are there?
Generally speaking, there are two main types of insurance products: Term Insurance and Permanent Insurance. Term insurance has a set time where the insurance expires (ie. 10 years) at which point the premiums increase upon renewal based on the increased likelihood of mortality (premiums will be higher when you're 40 years old than when you are 30). Permanent insurance generally has fixed premiums for life but the premiums are higher (because you are guaranteed to die at some point in your life). Permanent insurance does also have an investment component as well where a portion of your premium can accumulate in a side account. There are a number of options available for permanent insurance that suit many lifestyles - again, make sure you speak to an advisor about which options are best for you.
Is there anything else to know?
Life insurance is a big decision and, as already mentioned, there are a lot of factors to consider when choosing which product is best for you. If you already have an old insurance policy and haven't spoken to your advisor in a while it might be a good idea to contact an advisor to go over the policy with you (especially if you have gone through any recent life changes since you first bought the policy). Also, insurance does become progressively more expensive with age, so purchasing early can save you a lot of money on premiums. Finally, never assume that your Group Life Insurance that you get through your company benefit plan will be enough. Even if your employer plan covers 2-3 times your salary, you always want to consider: what would happen if you were to lose your job? or if you were to leave the company? you would be left without any form of life insurance.
Contact us today to schedule an appointment to go over your various risk management options.