Written by: Guest | Best Company Editorial Team
Last Updated: July 1st, 2020
Guest Post by Ethan Lichtenberg
Life insurance is an important part of the game called life. We all live, and we all die. It's inescapable, but having life insurance can give you an irreplaceable safety net.
The main goal of life insurance, whether you have term or whole life insurance, is to protect your loved ones in the unfortunate incident that you suddenly pass. Of course, there are all kinds of bad advice about life insurance out there, so it's best to stay informed.
If you are the breadwinner in your family, and you suddenly pass, your family will be at risk. Purchasing a life insurance policy can help you have peace of mind, and also give your family leeway in the case of a tragedy.
The question we're tackling today though is how much life insurance should you purchase? This is a tricky question, and your debts have a lot to do with the answer. This article will help you understand what you and your family need, and how your debts, no matter how much they amount to, should be part of the conversation.
What is life insurance?
There are a plethora of questions when it comes to life insurance. To fully understand the amount of life insurance you should purchase for you and your family, you should know some information about life insurance in general.
A life insurance policy is a contract with an insurance agency. The contract states that you will pay a monthly or yearly premium in exchange for a large sum of money in the case of your death.
Life insurance policies range from owner to owner, and there are many different kinds of life insurance. Term life insurance provides protection for a set period of time (say if you’re diagnosed with a disease), while permanent insurance, such as whole and universal life, provides lifetime coverage for you.
Now that you know the basics of life insurance, it is important to understand how large of a factor your debt can be after your death.
Debt is no joke. It is a part of every person’s life and is something many people carry for too long. Almost everyone dies with some amount of debt. It could just be next month’s credit card statement, but there could also be some large surprises that your deceased family member was not fully truthful with you about.
Some people die with unpaid equity loans or gambling debts exceeding hundred of thousands of dollars. Life insurance can prepare you for the storm that may come.
One of the most common leftover debt is a mortgage loan. Almost everyone has one, and it can be a hefty amount.
If you were the one making the money in the family, your family may not be able to afford the monthly mortgage on your home. Adding to the stress of a sudden family death would be the stress of selling the family home to pay for the mortgage.
Joint credit cards are important as well. Many married couples sign up for joint credit cards to make their money simpler to handle all in one place. If this is you, your remaining spouse who signed their name on the card with you is responsible for that debt.
Your signature is worth a lot when it comes to your debt. If you pass and had credit card debt only in your name, creditors will be out of luck. But they will try to convince your family that they owe on your debts, so make sure your family knows the facts.
A mortgage is another of the most common debts in a person's life. Many deaths in today’s world involve some sort of hospital visit which include sometimes months or years of treatment.
One obvious example would be cancer. Cancer is an expensive disease and could cost your family a great deal of money if you do not leave them the help they need.
How much life insurance do I purchase?
Your life insurance policy should be comparable to your outstanding financial obligations. This includes many things such as funeral costs, medical bills, and taxes after your death. But in the future, things like mortgage payments, utilities, and college tuition savings can be obligations. This is especially true when it comes to funding your retirement.
Life insurance costs range based on many different factors. Age, health, tobacco use, and family health history are some of the most common variables. The best thing to do is to find a quote for you and your family. Ask questions; now may be the time to purchase a policy.
If you’re wondering when you should purchase life insurance, it’s almost always a good time to do so. There is never a bad time to be prepared.
Hoping for a long life is a great thing, and taking the steps to make your life last long is even greater. But being realistic about how unpredictable life can be is the best of all. Remember, you’re never too old, or too young, to purchase a life insurance policy.
Ethan Lichtenberg is a freelance writer for Effortless Insurance. He would love to say that he’s at the beach writing on a leather-bound notebook listening to Bob Dylan, but really he’s on his first cup of joe with too much cream and has Shark Week playing in the background. That should tell you all you need to know.