One of the most fundamental questions you should ask yourself when contemplating life insurance is this: Will someone in my life be adversely effected (from a financial standpoint) by my untimely death? This is different from “Will someone be sad by my untimely death?” I will be sad. But I do not want to assume your financial liabilities.
- If You Were To Die Tomorrow, Who Would Assume Your Debt? If you own a home, a business, or have personal liabilities, someone else will become responsible for those liabilities (generally your next of kin). Therefore, your spouse, your parents or your siblings could end up having to pay your debts after the good Lord takes you.
- Do You Have Children? Guess what? If you have kids and you don’t have life insurance, you may have put your entire family at risk. I know that seems a bit harsh but it is a potential reality. Enough said on that.
- Are You A Business Owner? What would happen to your business if something were to happen to you? Do you have a succession plan? If you a business owner and do not have a succession plan, speak to a financial advisor to get you on track to help you create one. This could mean purchasing some type of insurance product and creating some documents determining who would inherit your business and its assets and liabilities.
- How Much Insurance Do You Need? This is not an easy question to answer and everyone is different. First, it depends on the variables I mentioned above. It also depends on your age, your sex (men are generally more expensive to insure than women), and how much insurance you can afford. The general formula used by insurance agents is somewhere between 7-10 times your annual salary. For example, if you make $100,000/year, you should consider buying somewhere between $700,000 to $1,000,000 of insurance. That being said, if your life is complicated (kids, business, lots of debt), you should probably look to increase that amount. Again, consider seeking the advice of a financial advisor who understands your financials before making this decision.