Life insurance can provide financial protection to your loved ones after your demise. However, buying life insurance may not be the best choice for everyone.
Who Needs Life Insurance?
Buying life insurance is like giving yourself the peace of mind in knowing that your loved ones will be protected if you pass away. Consider getting life insurance if you’re someone with:
- A Partner: If you share a mortgage with your partner, buying a life insurance policy may be a good idea. If you pass away, the policy can help your partner make mortgage payments if they decide to reside in the home. If you own your home and have no kids, you may not need a life insurance policy.
- Dependents: If you have kids, get life insurance—there’s no getting around it. Raising kids on one parent’s salary can be quite difficult. Even if one of the partners is a stay-at-home parent, life insurance should be bought for both parents. This is because if one of them passes away, the one has to pay for childcare, which typically costs as much as a full salary.
If you decide to purchase life insurance, it’s recommended you pick term life insurance over whole life insurance. Term life insurance provides you the option of purchasing a policy for a block of 10, 20, or 30 years. Most people prefer term life insurance because it provides coverage for the duration that the policyholder actually needs it, such as or until they retire, pay off their mortgage, or their children grow up.
Who Doesn’t Need Life Insurance?
Life insurance may not be the right choice for:
- Children: Considering children usually don’t bring in any income, buying life insurance for them may be unnecessary. You may get better returns if you skip buying a life insurance policy for your children and instead invest in a 529 plan for their college fund or build a bigger emergency fund.
- Those Without Dependents: If you have no dependents, consider buying life insurance only if there will be loved ones who will need monetary help to cover funeral expenses or the like after your demise. However, before you buy a policy, evaluate whether it would be more beneficial to put some money into a trust and formulate a will that directs how the funds should be utilized.