Buying life insurance is something that many people put off.
But it’s important to take the time to learn about what type of policy you may need and how much coverage you should buy. If you have a family, buying enough life insurance might be the most important part of your financial strategy.
Here are 4 things you need to know before you buy life insurance.
What is life insurance? Simply put, life insurance is an agreement between an insurer and a policyholder. When the policyholder dies, the insurer is legally obligated to pay a set amount of money, called a death benefit, to whomever the policyholder had predetermined.
Do you need life insurance? If people you love are dependent on your income, you may need life insurance. The death benefit can serve as a replacement for income that would vanish in the case of your passing. A personal tragedy doesn’t have to become a financial crisis!
What if I don’t have any dependents? Then life insurance may not be for you! However, you should note that life insurance might be useful if you’re carrying high levels of debt like student loans or a mortgage.
How much coverage should I get and how long should my policy last? As a rule of thumb, your life insurance coverage should be worth 10X your annual income. That should provide your family with a financial cushion while they grieve and plan for the future.
If you buy a term policy, be sure that it lasts through periods of high financial responsibility like paying a mortgage or raising a family.
If you want to learn more about life insurance, let me know! I can help you evaluate your financial situation and what a policy would look like for you.