A Comprehensive Guide to Assessing Your Life Insurance Needs
You work hard to provide for those you love, and their happiness and well-being are at the forefront of everything you do. When you’re the breadwinner of the family, their financial stability depends on you. The difficulty comes in looking toward the future and ensuring your family’s financial security even in your absence.
We never know how our future will pan out, but it is possible to protect your family’s future. Life insurance is designed to provide for your loved ones in the event that you pass prematurely, but exactly how much insurance do you need?
What Is Life Insurance?
Life insurance plans are designed to financially protect your loved ones in the event that you pass prematurely. There are two types of life insurance policies: term life policies provide coverage for a specified period of time and are available for terms of either 10 or 20 years. Permanent life insurance provides coverage for your entire lifetime. Life insurance premiums tend to be very affordable, especially if you are healthy and purchase a plan at a younger age.
How Much Insurance Coverage Do You Need?
Consider the Long-Term Needs of Your Family
If you have a family, consider the age of your kids. If you pass prematurely, is your spouse able to continue working, or must they stay home to take care of the kids? Is a college education a part of the plan? These factors are important to address so you can correctly determine your ideal level of coverage.
Figure Out Your Expenses
How much monthly income do you need to pay your bills? Start by assessing all your monthly expenses. Include mortgage payments, groceries, utilities, sports, and hobbies, as well as car loan payments or other loans. Don’t forget to leave some wiggle room for any unexpected costs. Multiply the final amount by 12 months to estimate your annual cost of living.
What Is My Coverage Amount?
How many years does your family need to be supported? If your kids are very young, they may need support for at least 15 years. In this case, a 20-year policy may work best. If you have older kids, will a 10-year policy be sufficient?
These questions and many others are likely to arise when you consider life insurance. It’s best to connect with a life insurance advisor in Edmonton to discuss making life insurance part of your financial plan. They will conduct an insurance needs analysis to determine the best policy and assess how much life insurance coverage you need.
How Much Does Life Insurance Cost?
The cost of life insurance depends on a variety of factors. These include:
- The amount of coverage you want to have.
- Your age when you sign up for your policy.
- Your health and risk factors.
- The type of policy you choose.
When you purchase a policy in your 20s and 30s, the risks of passing due to health problems are much lower than for individuals in their later years. For this reason, the monthly premiums for permanent and term life policies are much lower when you’re younger, so it’s best to purchase your policy at an earlier age.
What Is the Best Life Insurance Policy for You?
While every situation is different, you’ll want to consider your stage in life when selecting an insurance product. If you have a family, your monthly expenses are likely quite high, so you’ll need a larger policy to meet your family’s needs. In this case, you may only require a policy for a specified time, so a term life policy may work best.
If, however, you’re an empty nester living with a spouse in a home that is mortgage-free, your financial needs are likely much less. If you’re financially secure, you may choose to have a smaller permanent life insurance policy as a cushion for your spouse or as a gift to your children when you pass.
Purchase Term Life Insurance in Edmonton
It can be confusing to uncover your best options and get the right amount of coverage for your family. Even if you have an existing life insurance policy, circumstances change, and your coverage needs may differ over time. That’s why it’s best to connect with a certified financial planner and conduct an insurance needs analysis to correctly determine your needs. If you’d like to learn more, let’s sit down for coffee to walk through your questions.
