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The Truth About Life Insurance

Who Needs It, When, and Why

Life Insurance can be a confusing topic. Some of us have a policy through our employer but haven’t considered the coverage amount. For others, life insurance might just be something we’ve chosen to put off until later. No matter what stage of life you are in, life insurance is an important consideration. Here are a few things to know about life insurance. 

Who needs it? 

Mostly everyone. If anyone else in your life depends on your income, you should give some serious thought to life insurance. If you regularly provide support to someone using the money you earn – whether it’s a spouse, child, or grandchild – you should take a moment to ask yourself, What would that person do if my financial support suddenly ended? Even if you have no dependents, you may want to consider a small policy that will pay out enough to allow your loved ones to cover your funeral expenses without having to resort to crowd funding. Remember, your loved ones will be grieving your loss; you don’t want them stressing over how they will pay for your funeral costs, which hover around $10,000.

How much should I have? 

The general rule of thumb is seven to ten times your annual salary. However, this is just a starting point. You should also consider all major financial obligations, such as mortgages, particularly if you want family members to be able to remain in the home without financial stress. Or, maybe you have children who will need assistance with college tuition. At a minimum, you want a policy that can cover your major financial obligations, pay off your debts and funeral expenses, and provide a few years of your salary for your loved ones to live on while they find a way to increase or stabilize their own income sources.  

Should I have a term or whole life policy? 

This depends on your health, age, and how much you can afford to invest in a life insurance policy. Term life insurance does not accumulate any cash value and only lasts for the term of years that you select at time of purchase. Essentially, this type of policy only provides the death benefit to your beneficiary if you pass away during the term of your coverage. On the other hand, whole life insurance does carry a cash value, and generally has a guaranteed return on the premiums that you invest into the policy. Because of this, whole life policies are generally more expensive than term policies.

What affects the cost? 

Generally speaking, the condition of your health, your age, and your smoking status all play a role in how much life insurance will cost. As mentioned above, term policies are usually less expensive, as these policies do not carry cash value. Waiting to purchase life insurance can cause your premiums to be higher, since as you age, the risk level to the insurer increases. The company will pass this risk on to you by assessing higher premiums. Some policies do not require a health exam and will merely rely on your answers to certain questions designed to assess your health status. Although these policies are usually easier to obtain, the premiums can be higher, as you are avoiding the medical assessment.

How do I buy life insurance? 

There are many resources available online that can help you get started. It’s important to use a reputable company with a good track record for customer service and proper claim payment. Do your research and ask friends and family members for recommendations.

Remember, no matter what kind of policy you choose, the sooner you purchase life insurance, the better, as it’s more expensive with each passing year. If you’ve been considering it, think about the people you will leave behind and invest in life insurance for everyone’s peace of mind. 

Syreeta B. Stewart is an attorney and owner of SBStewart Law, PLC, a law firm focusing on family law, bankruptcy, and small business development. A native Richmonder and UR graduate, Syreeta is a proud wife and mom to three busy children and one newly adopted fur-baby puppy named Sophie.
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