One of the questions that I have received as a financial professional several times throughout my career is, “Do I need life insurance?” And the answer to that is the same for everyone, it depends. Let me show you in what scenarios you would need life insurance (LI) and in what scenarios you would not need LI.
Caveat Alert!
So here is the deal. Not everyone needs life insurance. But most people do. I’ll get into the specifics of who needs life insurance and who does not in the next sections.
But let me show this caveat. I have only seen a couple instances in my career working with individuals and in finance where a policy other than term life insurance was in order.
So this article will speak to term insurance.
The purpose of insurance (of any kind) is to transfer risk. It is not to invest. It is simply to transfer the risk of you losing money to another party.
Do I Need Life Insurance? Yes
Like I said before, MOST people need some amount of life insurance.
Speaking broadly, if you fall into one of these two categories, you NEED some amount of LI.
- Someone else counts on your income to live or you are a stay at home parent.
- You do not have the savings put aside to pay for your final expenses (burial, funeral, cremation, etc.).
So who does this normally include?
If you are a parent and have children that depend on your income you NEED LI. If your spouse depends on your income to live, you also NEED LI.
If you do not have any dependents, you may not need life insurance. But you need to make sure that you have money put aside to pay any outstanding debts that you have as well as any final expenses that you may have.
If you don’t have the money put aside for those things, then you NEED to have life insurance.
You don’t want your family and/or friends to have to pay your expenses if you were to pass away.
Do I Need Life Insurance? No
So as you can see, most people will need some amount of LI.
But not everyone NEEDS life insurance.
Here are the scenarios where you may NOT need LI.
- You have no one else who depends on your income if you were to pass away.
- You have enough money set aside to pay for any outstanding debts that you have as well as enough to pay for your final expenses.
- You have built an amount of savings that is equal or more than the amount of life insurance that you would have purchased. (This is also known as being self-insured.)
There aren’t going to be a ton of people who fall into one of these categories. But they are out there.
Don’t have a life insurance agent tell you that you NEED it no matter what. Because that is simply not true.
You might be wondering if you should get LI even if you don’t need it.
The answer is it depends. 🙂
There is certainly nothing wrong with having more LI than you need. There is also nothing wrong with having LIeven if you are self-insured.
So if having LI even if you don’t need it is something that will make you sleep better at night, no problem! Get a LI policy. 🙂
Final Thoughts
Just like with most financial questions, Do I need LI is one that does not have a clear answer. It depends on your situation, financial position, family, etc.
But this is the guide that I have used for years with clients in determining if they need LI or not.
I am here for you!
You can do this!
Until next time!
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