Lacking life insurance coverage could hinder your family’s financial freedom.
Before you opt for the first life insurance policy that you see, familiarize yourself with your needs, wants, and budget. Life insurance is there for your family when you’re no longer around. This policy covers the expenses of the funeral, your remaining debt, allows your spouse to retire on time, and can even put money away to ensure that your child can go off to college.
To determine how much capital of your family will need at the time of your death, ask yourself these two determiners:
- How much will be needed at death to meet immediate obligations? (e.g. uncovered medical bills, funeral costs, outstanding debts, mortgage balance, etc.)
- How much future income is needed to sustain the household? (e.g. the total “present value” of cash-flow streams your family will need after your death)
In essence, if you have no dependents and have enough money to pay your final expenses, you don’t need life insurance. If you want to create an inheritance or make a charitable contribution, buy enough life insurance to achieve those goals!
If you do have dependents, you’ll want to buy life insurance. Your family will lose your source of income, and your duties (for example, if you do your own taxes, the survivors might need to hire a professional bookkeeper). Even if you’re a stay-at-home dad, the family will need to hire a professional to cover all of the tasks that you once did.
Life insurance provides enough financial support for the family to focus on mourning your loss without worrying about ends meeting. Your family might need extra money to make some changes after you die, for example, relocating, or your spouse may go back to school to be in a better position to support the family.
Determining the right amount of life insurance for you and your family is best left in the hands of a professional. Contact the life insurance advisors at Tompkins Insurance Agencies to get started on your tailored policy today.