Do you need life insurance?
There are many reasons to purchase life insurance. Let's answer the most basic of questions first. Do you even need it? We'll review a few of things to consider. Do people depend on you, such as a spouse or children? Do you have a mortgage? Does your retirement income depend on a spouse's Social Security? If you answered no, you may not need life insurance, and may want to explore other options. However, if you answered yes, let's continue on to see what types of life insurance suits your needs.
What type of life insurance do you need?
What kind of life insurance is right for you depends on your situation and life stage. Are you searching for the lowest-cost solution? Is your need for life insurance temporary (to cover kids or a mortgage)? If these are the cases, then term life insurance (or temporary) policy may be the best option for you. If you do not meet this criteria, then a more permanent solution may be what you're looking for.
How much life insurance do you need?
To calculate your potential needs, consider the DIME formula - Debt, Income, Mortgage, and Education. You'll want to add these figures up and ask your financial professional to provide a quote for this figure as well as two lower figures. For example, if the total needed is $500,000, ask for three quotes, for policies with benefit amounts of $500,000, $400,000 and $300,000.
How much life insurance can you afford?
You'll want to buy as much life insurance as you can afford, but you do not want to strain your monthly budget. Things to think about are age and health. Your rates will be lower than they might be when you're older. People in good health typically receive better rates than those with medical conditions. Security is also something to consider. Some life insurance is better than none at all. Even if you can only afford half of your total need, you've created some financial security for your loved ones, and this will bring you, and them, peace of mind.