Why buy life insurance?
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It is generally a cost-effective way to provide for your loved ones after you are gone. It can be an important tool in the following ways:
- Income Replacement: For most people, their key economic asset is their ability to earn a living. Proceeds from a life insurance policy can help supplement retirement income. This can be especially useful if the benefits of your surviving spouse will be reduced after you death.
- Pay off debts: Consider life insurance so that you loved ones have the money to offset burial costs, credit card debt, and medical expenses, etc. Life insurance can (also) be used to pay off the mortgage, supplement retirement savings, and help pay college tuition.
- Estate Planning: The proceeds of a life policy can be structured to pay estate taxes so that your heirs will not have to liquidate other assets.
How much life insurance do I need?
To decide how much life insurance to buy, you need to first figure out what your goals are in purchasing this coverage. As yourself the following:
- Do I want to spare my loved ones funeral costs and outstanding debts?
- Am I concerned that my spouse will not be able to continue to pay off the mortgage?
- Am I concerned about college savings for my children or retirement savings for my spouse?
While all situations are different, you will have to purchase enough insurance to provide for their future, while considering how much of your budget should be devoted to life insurance.
Some experts suggest that you purchase 5-8 times your current income. (However), you will also need to figure how much your dependents will need to pay for in terms of the cost of owning a home, college tuition, food, clothing, child care, nursing home, funeral expenses, and estate taxes.
Your insurance needs will vary greatly according to your financial assets and liabilities, income potential and level of expenses.
Call your local Absolute Insurance Agent to help you determine what is right for your life insurance needs.