Do you need term life insurance?
It’s a question many people ponder. But with so many competing priorities affecting your budget, do you really need life insurance of any variety to protect your family from financial hardship?
According to the 2015 Insurance Barometer Study by Life Happens and LIMRA, 43 percent of Americans say that if the primary wage earner in their household died, they would feel a financial impact within just six months.
So it appears life insurance is something people should take the time to think about more carefully.
Term life insurance, like whole life insurance, offers a way to help ensure your family can live comfortably if the unthinkable happens to you. Term life provides a payout (“death benefit”) to your beneficiaries if you die while your policy’s term (the length of your policy) is in effect. That death benefit can help them pay everyday living expenses, loans, tuition, and more.
As you ask yourself the question, “Is term life insurance for me?” perhaps the best the way to find the answer is by asking yourself still more questions.
A Checklist to Help You Decide if You Need Life Insurance:
1. Do I have a life partner/Am I married?
If you do, could your partner/spouse make ends meet if your income went away?
2. Do I have children?
Children, up until when they’re adults (and sometimes beyond!), depend on their parents financially.
3. Do I have a mortgage?
Also, consider how long it will be until your home loan is paid and how much the payments are. If you want your family to be able to stay in your home after you die, they’ll need to have enough money to make your mortgage payments.
4. Do/Will my children go to college?
For me to send my daughter to the public university I got my B.S. degree from, it would cost (excluding grants and scholarships) approximately $25,000 per year for in-state tuition, fees, and room and board. Expect to pay a heap more if your children opt to go to a private school.
5. Do I have car loans?
According to an article on CNBC.com, the average car loan is over $27,000. No car loan now? Remember, vehicles don’t last forever so your family may need to finance the purchase of one in the future.
6. Are my funeral expenses paid?
If you haven’t pre-planned your final expenses, your family might face a lofty funeral bill when you die. According to the National Funeral Directors Association, the median cost of a funeral in 2012 was $7,045 (not including the cost of a monument, cemetery fees, and approximately $1,000 for a vault).
7. What is my family’s health care situation?
Is your family’s health insurance through your employer? If it is, your loved ones are faced with maintaining it through COBRA or finding coverage on their own after you die. The average family coverage premium for health insurance is $1,403 per month or $16,834 per year, says the results of the Henry J. Kaiser Family Foundation’s “2014 Employers Health Benefit Survey.” Will your family be able to afford that without your income?
After answering these questions, I think it becomes rather clear how important life insurance can be in ensuring the financial well-being of your loved ones.
8. But can you Afford Life Insurance?
If you’re worried about the price tag that comes with life insurance policies, you’re not alone. According to the study by Life Happens and LIMRA, the cost is the primary reason most Americans give for not owning life insurance. Fortunately, life insurance costs far less than most people believe it does. Eighty percent of consumers misjudge the price for life insurance; Millennials overestimate the cost by 213 percent and Gen X-ers overestimate the cost by 119 percent.
Term life policies, in particular, offer an affordable option for giving you peace of mind. Because they pay a death benefit within a specified period of time, you can tailor them to your family’s needs. The typical term lengths of term life policies are 10, 15, 20, 25, or 30 years. Terms as short as one year are available, too. The shorter the term, the lower the premium will cost you. Besides the flexibility of choosing your policy’s term length, you can also select the amount of the death benefit it will provide to your family.
Back to the Original Question
Is term life insurance for you? It’s a decision you and your family will need to make after carefully exploring your options.
You can get an estimate of your life insurance needs by using this online calculator, and get a free, no-obligation quote on what a term life policy might cost. Also, consider talking with a knowledgeable term life insurance expert, so you’re well informed and can make the best choice for you and your loved ones.