This week marks the second annual Women’s Money Week and today’s topic is pretty appropriate now that we have a baby girl on the way: Family and Money. With our family about to grow this Spring, we knew it was time to buy life insurance policies. We already have small policies though work, but knew we should have more coverage. Before I delve into the different types of life insurance and how much to purchase, let’s take a step back. How do you know if buying life insurance is the right decision for you?
Obviously everyone’s financial situation is a little different, but in general, you should have life insurance once someone else is financially dependent on you. For most people, this is when you’re starting (or thinking about starting) a family. Even if you’re married with no kids, but have a mortgage or significant student loans, life insurance is probably a good idea to look into. Same goes for if you’re single and a parent co-signed on a mortgage or student loan. If your parents would be burdened by paying off that debt, it might be a good idea to get a small life insurance policy.
Overall, life insurance gives you peace of mind that your loved ones will be taken care of financially in the event the unspeakable happens. You’ll want life insurance to cover the costs of child care, schooling for your children (especially college), any outstanding debts (mortgage, student loans, consumer), regular living expenses (particularly if you and your spouse were depending on two incomes to cover these expenses), and funeral costs.
Since your expenses could differ from another couple’s needs, I’ll speak to how much coverage to buy later. Additionally, your age and the amount of money you have set aside for retirement and savings will also impact how much life insurance to purchase. Therefore, it’s a good idea to reevaluate your financial situation and life insurance coverage every few years.
Any other burning questions about life insurance?