Does someone depend on you financially? If your answer is yes, then you should consider purchasing an individual life insurance policy. While employer-sponsored life insurance is a great benefit, it typically provides only one or two times an employee’s salary. The role life insurance plays in your financial plan depends on your unique situation, but the typical amount of life insurance that is recommended is 10-20 times your annual salary. Consider below some of the most common policyholder situations.
Married with no children
Once you are married, financial obligations are shared. For this reason, it is recommended that you obtain a life insurance policy. If the unthinkable happens, having life insurance will provide for your surviving spouse to maintain a house, pay off debts, and replenish some of the lost income
Married with children
In the event of a loss, a life insurance policy will allow your spouse and children to continue to live the lifestyle they are accustomed to. When comparing life insurance policies, it is important to consider your family’s financial needs, like their living expenses, as well as future events such as college tuition and marriage.
As a single parent, you are the sole provider for your children. Purchasing a life insurance policy provides the peace of mind of knowing that your children are provided for if something should happen to you.
We tend to not think about the financial benefit stay-at-home parents provide to their families. Stay-at-home parents provide childcare, housecleaning, transportation, and overall home management. Without a stay-at-home parent, these all would cost money. It is important to consider what financial impact it would have on a household if a stay-at-home parent passed away. Life insurance for full-time homemakers can provide for the named beneficiary, so as to ease the financial burden that may result from a loss.
Did you know that if you passed away your heirs could face a large estate tax payment? The death benefit from a life insurance policy can help your heirs cover this tax or any other unexpected financial expense that may arise in this situation.
Small business owner
Life insurance for businesses is designed to cover any financial losses that may result in the death of you, your partner, or a key employee. Typically designed so that the surviving business partner would have the money to purchase the company interests, life insurance for businesses can also be structured as “key person insurance,” where if a key employee dies the business owner will receive a benefit to help offset the financial impact of losing the key employee.
Life insurance is important for single people as well. Whether you are providing care to an ailing parent, or wish to have the necessary funds set aside for burial, not having a dependent does not disqualify a single person from needing the benefits that life insurance can provide. In addition, purchasing a life insurance policy at a young age when you are healthy helps to lock in rates when they are typically lower.