Life Insurance
Do You Need It?
No—if you’re on your own and live in an apartment. Yes—if you are anything other than that. At the very least, you’ll want a small policy that will help your family pay for funeral expenses should the need arise.
Single
If you’re a single homeowner or have other debt, life insurance could help pay off those debts. Let’s say you leave a nice little house that your parents will then have to sell. If it takes any amount of time to sell it, they’ll be stuck with the mortgage payments. A policy would help them out.
Married
If you’re married with no children, a policy is still a good idea. Especially if your spouse doesn’t work or doesn’t make much money. If you weren’t here, would they be able to cover monthly expenses on their own? If not, a life insurance policy would help fill any gaps in income.
Children
This one’s a no-brainer. If you have children, you must have life insurance. Period. Unless you’re rolling in the dough, make sure you have a decent policy that will give your children enough money to live on until they can take care of themselves.
How Much
There’s no easy answer for this one. Some experts suggest anywhere from six to ten times your annual salary. Your best bet is to not figure a number based on your salary at all. Sit down with your budget and simply figure out how much your family will need to live.
What Kind
So, you’ve figured out you need life insurance and how much you need. There’s one decision left: what kind? There are four main types of life insurance:
- Term Insurance – This is the most basic kind of insurance. You buy coverage for a specific price over a specific amount of time. Should you die during that period, your beneficiary gets the value of the policy.
- Whole Life – It’s like term, but you buy this policy to last your whole life, not just a set period. Your payments, otherwise known as premiums, stay level throughout the policy and the insurance company invests a portion of those premiums. The company shares any profits from these investments with you in the form of dividends.
- Universal Life – It’s like whole life insurance but you can contribute more than your minimum monthly premiums if you want, as an investment. The insurance company then chooses the investments themselves, which are usually bonds and mortgages. Your profits get put into a cash-value account that you can use to pay your premiums or leave alone to grow.
- Variable Life – This one is just like universal life, but there is a wider selection of investment choices, including stock funds.
If you’d rather be directly in charge of your own investments, then a term policy would be the best choice. You can always stop by your credit union and speak to an investment specialist to learn about the various other ways you can invest your money. Visit our Save section to discover the different ways you can save and invest.