What if you were no longer here to provide for your family and loved ones? What if you couldn't watch your children grow, graduate from college, and begin their own families? What if your spouse couldn't afford the home, car, college tuition, or unanticipated medical expenses, all because you hadn't planned for the unexpected? Life is full of "what ifs," and we don't always have the answers to every question. That's why it's important to put a plan in place that will protect your family if you're not here. Life insurance can be an essential part of that plan.
How much do you need?
Life insurance can provide financial resources at your death for your family or business, or for charities and other interests. The amount of life insurance you need depends on a number of factors, including the size of your family, the nature of your financial obligations, your career stage, and your goals. The answers to these questions may help you determine how much life insurance you should consider:
—What immediate financial expenses ( e.g., debt repayment, funeral expenses ) would your family face upon your death?
—How much of your salary is devoted to current expenses and future needs?
—How long would your dependents need support if you were to die tomorrow?
—How much money would you want to leave for special situations, such as funding your children's education or gifts to charities?
—What other assets, including existing life insurance, do you have?
—What if your spouse dies first?
If you're the primary breadwinner in your marriage, it's easy to overlook the financial and emotional strain your family will face if your spouse should die before you. Your income might be diminished if you have to work less in order to spend more time with your children. Or, you may have to work longer hours to cover unanticipated expenses for daycare, house cleaning, meals, etc.
To your young children, losing one parent may seem like losing both. If your spouse should die before you, insurance on his or her life can offer financial security for your family, allowing you to spend more time providing emotional support for your children.
Even if you're single
Just because you're single doesn't mean you don't need life insurance. If you died tomorrow, what financial obligations would remain? Do your parents or other relatives depend on you for support? Do you want to leave something to people close to you such as siblings, other relatives, or close friends? How will you provide for your favorite charities? Do you have pets that will need care in your absence? Life insurance is an important part of any financial plan, even if you're not married.
Don't let hard times be an excuse to cancel your insurance
During tough economic times, you might be tempted to stop paying your life insurance premium. However, a recent study reveals that 4 in 10 households with children under age 18 would have trouble meeting their everyday living expenses if the primary breadwinner died. Yet 30 percent of U.S. households have no life insurance, and of those that do, more than half ( 58 million ) say they need more life insurance ( Life Insurance and Market Research Association 2010 Trends in Life Insurance Ownership ) . Cancelling your life insurance to save a few dollars when money is tight may jeopardize your family's financial future.
Review your plan
Whether you have life insurance through your employer or purchased privately, have you reviewed your coverage recently, especially in relation to your current circumstances? Do you have enough coverage to meet your changing needs and goals? If you change jobs, can you take your insurance with you? Lives change over time and your financial needs may change as well. Review your present coverage with your insurance professional to ensure it's keeping up with your changing financial needs and goals.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2011.
Philip Sitar is a financial advisor for Ameriprise Financial Services, Inc.
