Life insurance is a major type of insurance that you can buy, but not everybody needs protection.
It is important to look at the reason that people have this protection before you actually decide
you need life insurance.

Purpose of life insurance coverage

The concept behind life insurance is very straightforward. Life insurance provides protection in
the event of your death for your family members. Life insurance is payable upon death, and
money can help the surviving spouse and minor children pay their bills and move on with their
lives.

The amount of life insurance you need depends on a variety of factors, including your wages,
assets and the amount your beneficiaries need to sustain their established way of living. You may
need a million dollars or more life insurance if you receive $100,000 a year and have a couple of
kids attending college. You might not need as much life insurance if you have a big nest egg, say
several million dollars. This is because the savings you are leaving behind will produce income
from your spouse and children and make them less dependent on a large life insurance payout.

If you’re young and just starting out, you may not need life insurance. Recall that life insurance
seeks solely to cover those who depend on your income. If you’re single and don’t have children,
you probably don’t even need life insurance.

The exception is if you care for an elderly parent. In this situation you would want to maintain a
$100,000-$250,000 life insurance to have the help they need once you are gone. You would also
want to look at your parents’ long-term care plans as well as life insurance coverage.

Term Life vs. Whole Life

Life insurance is a quite easy purchase, but the industry has tried to complicate things over the
years. Many insurance agents will guide you on life insurance policies that combine investment
with insurance coverage. This may sound like a clever tactic at first blush but it turns out, having
a life insurance policy and a savings nest egg can take care of all of your needs and assure that
your family and loved ones are taken care of during that time. Compared to term life coverage,
the premiums for whole life coverage can be higher, and the investments are always challenging
and often costly. Most individuals would be better off buying a term life insurance on a relatively
cheaper term than making their own savings.

For example, if your life policy costs $100 per month and you can get a similar $20 life policy,take $80 extra that you would have spent every month and put it in your 401(k) job or good
mutual fund stock. Over time, your savings account will have a lot of money and you still have
your life insurance coverage.