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Do I Need Life Insurance?

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Table of Contents  
  1. Who Needs It?
  2. How Much Do I Need?
  3. What Affects Cost?

We have all asked ourselves at some point, do I need life insurance? You’re young and healthy, nothing is going to happen to you, right?

Sorry to be a debbie downer, but the reality is anything can happen to you at anytime. Will someone suffer financially once you’re gone?

Will your family be able to afford mortgage payments and other living expenses? Funerals are really expensive, will they be able cover the cost?

If the answer is yes to any of those questions, then it’s probably a good idea to look into an insurance policy. Life insurance will help replace your income so your family can meet important financial needs if you are no longer around.

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This week we have Francois de Lame from PolicyGenius on the show to answer our questions about life insurance.

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Who Needs It?

You’re Married

Most people start to think about life insurance when they get married because they are starting a life another person and building a future together.

If something happens to you, will your spouse’s income be enough to pay off debts and cover living expenses? If you are the breadwinner, your partner could find themselves in a really bad financial position if they are left with good amount of debt- like a mortgage or students loans, for example.

You Have Kids

For most families two incomes are necessary to make ends meet. If you died suddenly, could your family continue their standard of living on one spouse’s income? Would the plans for your children’s future, like going college, be affected?

Even if you’re planning to have children soon, you’ll want to buy life insurance now before the pregnancy. Prices can go up. Getting a policy will insure they can still have the future you saved for even if you are not around.

You’re a Single Parent

If you are a single parent and don’t have life insurance stop reading this and look into getting some right away. With so much responsibility resting on your shoulders, you need to make sure you have insurance to protect your children’s future.

Although it is super important, only about 4 out of 10 single parents have life insurance. The ones that do usually need more. As the sole breadwinner and caregiver, your children depend on you and only you. What would happen if you were no longer around?

You’re a Stay-At-Home Parent

Just because you don’t get a paycheck every week doesn’t mean you don’t make an important financial contribution to the family. Besides taking care of children, there are so many other important tasks and the value is often underestimated.

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Average cost of daycare in NYC tops $16G. It’s the largest annual household expense for many families leaving them struggling to find affordable care. Without the stay at home parent around, the cost of living significantly increases for the other parent,  Life insurance can help your family preserve their quality of life.

You’re Single

Most single people don’t need life insurance because no one depends on them financially. However, don’t wait too long to get a policy. It’s much cheaper to get a policy when you’re young and healthy. In the insurance world, the older and less healthy you are, the more you pay for insurance.

If you are providing financial support for another family member like a aging parents or a sibling you may want to consider life insurance when you’re single.

How Much Do I Need?

Figuring out how much life insurance you need is different for everyone. It depends on your personal and financial situation. There are three main drivers that affect the amount of coverage you need.

Family Size– How many kids you have and their ages affect how much life insurance coverage you will need. If you have a new born, you would want to provide them with financial stability for at least 18 years. You would need more coverage then lets say someone with a 10 year old who would only need about 8 years.

Spouse Employment Status– If your spouse doesn’t work or is unable to work, your policy would depend on how much they would need to live without your income. If they do work, you may just want to provide them with a cushion until they can get back on their feet if something happened to you.

Debt– You may be gone but your debt isn’t. Whoever you leave behind is stuck with your debt. I know if something happened to Andrew there is no way I would be able to make monthly mortgage payments. I would be drowning in debt. You want a policy that can help pay off any debt you may leave behind.

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What Affects Cost?

Besides the personal and financial factors, there are a few other things that will affect the cost of your policy.

Age- If you are a healthy 25 year old looking to get a 30 year policy, chances are you will not die between now and 55 making your policy very affordable. However, if you are 45 and looking to get a 30 year policy, there is a higher chance of you dying during the length of the policy so the insurance company will charge a higher premium. They are assuming greater risk.

Gender also plays a role. The fact is that women, on average, live nearly five years longer than men. Sorry guys.

Health Issues- Any preexisting conditions will affect the cost of your policy just like health insurance. Most providers require a medical exam that will record height and weight, blood pressure, cholesterol and other key metrics. You can get a “no exam” policy, but it will cost you.

Although there is nothing you can really do about it, your family history of disease and illness does get factored in to the price as well.

Lifestyle– If you like living on the edge, you will get charged more for insurance. It may not sound very fair but if I’m brunching with my friends on Sunday and you are jumping off Mount Everest in a wing suit you are definitely more likely to die.

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Smoking, drug use and excessive drinking also puts you at a higher risk for all sorts of health issues so you will pay more for a policy. Just quit smoking already. If I can do it, you can do it.

What it really comes down to is peace of mind. Knowing your family will be financially protected if something ever happened to you.

Not everyone needs insurance but many of us do. It is your personal choice. Insurance is actually not as expensive as you think. With PolicyGenius quoting policies as low as ten dollars a month it can be very affordable.

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