Do I Need Life Insurance?

You’ve seen all the commercials on TV. You probably saw some of the advertisements online, you might have even been asked about it at work. We hear about life insurance all the time, but just what is it and does one really need it, and if I do need it, how much do I need?

What is life insurance? Life insurance would be more accurately called death insurance. Essentially, you pay money into a fund along with a group of other people as well as some fees for the life insurance company’s profits, and then it would pay money to someone you choose (usually a spouse or child) if you were to die while the insurance is in effect.

So how does one know if he or she needs life insurance? Well, do you have a husband or wife? How about a child? Is there anyone else that depends on your income? If not, chances are you probably don’t need life insurance, because there is no one that depends on your income being around to help pay for expenses. If someone does depend on you being around and your income, you most likely do need life insurance. If you have a great deal of money saved up, which would be enough money to take care of your loved ones if you were to pass, you might not need life insurance, but if you even question it, you probably should get it. This money will help replace your income and keep them financially sound, while they are dealing with your loss. It’s the best gift you could ever give your family.

You should always look for best life insurance providers to know what type of company suits you best according to your need. Or else, you can talk to your like planner who can recommend you the best life insurance providers and their best policies.

So if you decide that you do need life insurance just how much might you need? Well, just like everything else in life, it depends. You will need to be able to leave your love ones enough money to replace the money you bring in. Let’s say your 40 years old, and you make $50,000 a year. How much might I need in life insurance? How about $250,000 that seems like a big number, right? Well, that would only replace your income for five years. In reality, to replace your income you would need about $625,000 in life insurance to replace your income indefinitely.

Although it may seem like 625,000 would replace your income for 12.5 years, it will actually replace your income forever, if you invested your money properly. The stock market has averaged a 12{fde3a472c21c787eeb5debe2d7eef0c66167f38fbc1b72d08925ae3660b478a3} rate of return since inception, so if you put your $625,000 in some decent mutual fund with a great historical track record, you can pull off about $50,000 per year, which is 8{fde3a472c21c787eeb5debe2d7eef0c66167f38fbc1b72d08925ae3660b478a3} of the 12{fde3a472c21c787eeb5debe2d7eef0c66167f38fbc1b72d08925ae3660b478a3}, leaving the other 4{fde3a472c21c787eeb5debe2d7eef0c66167f38fbc1b72d08925ae3660b478a3} as a raise each year so that you can take out slightly more money each year to curb inflation.