Life Insurance coverage: Is It Wanted and Is It Value It? – GOBankingRates

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Whether you need life insurance depends on your family situation and financial obligations, as well as your stage in life.
For people whose families could meet their financial obligations if one of the breadwinners weren’t around, insurance probably isn’t essential. But, for people who have a small nest egg and small children, it just might be essential.
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“Life insurance is a cornerstone of financial security,” said Brittany Parisi, a life insurance agent for digital life insurance company Bestow. “While no one wants to think about a scenario where they might not be around, it provides valuable peace of mind to know you have a plan in place no matter what happens.”
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Read on to determine whether life insurance belongs in your financial portfolio — and how much it costs.
To determine whether life insurance is right for you, here are some questions to ask yourself.
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“You may need life insurance if there are people in your life who depend on you for their financial well-being,” Parisi said. “This usually happens during some of life’s biggest milestones, including getting married, buying a house, having a child or opening a business.”
But life insurance isn’t just for married couples or people with children, said financial coach Acquania Escarne, who runs The Purpose of Money website.
“You should have life insurance if anyone depends on you for income,” she said. “That could include your spouse, children, siblings and even your parents. Life insurance provides income to your family when you are gone and ensures they don’t have to worry about finances while they are grieving. Your life insurance policy can pay off your mortgage, fund a child’s college education and provide your spouse or children the necessary income to live the next five to 10 years without you.”
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Faisa Stafford, the CEO of nonprofit Life Happens, said it’s important to think of what could happen if a parent’s financial and other contributions were removed from a family.
“It’s estimated that it costs $233,610 to raise a child to age 18. And that number only increases if you plan on contributing to your child’s college education,” she said. “Statistics like this underscore how incredibly important it is for parents to consider life insurance.
“This is as true for working parents as it is for stay-at-home parents whose unpaid contributions to the family would be expensive to replace. And we can’t forget single parents supporting families on their own — they have an especially important need for financial protection in the form of life insurance.”
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“Business owners should definitely have life insurance,” Escarne said. “For one, it’s required for some (Small Business Administration) loans. Secondly, if you have a business partner, life insurance can ensure your business partner can continue to run the business after you’re gone.
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“It also protects your family from having to take over the business if they don’t want to run it. Life insurance could pay off your interest in the company and help your business partner by giving them the income they need to replace your role or major contributions to the business.”
You could need insurance, even if you are older, if you are at either end of the financial spectrum.
“Surviving partners often must make do with less Social Security and pension support. They may also have unforeseen funeral costs to cover,” Stafford said. “This can seriously hamper their finances. What’s more: If you’re planning on leaving money to heirs, they could be required to pay estate taxes of up to 45%. Life insurance, which is almost always exempt from federal taxes, can be immensely helpful in any of these situations.”
The amount and type of insurance you buy depends on your needs and your age. The younger you are when you buy the insurance, the less expensive it is. Plus, while you’re young and in good health, you can qualify for policies you might not be able to buy later in your life.
Insurance offered through your employment is enough when you’re just starting out, said Guy Clanton, a senior financial planner and shareholder at Truepoint Wealth Counsel
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“For individuals in their first job and particularly those who are unmarried, it is not necessary to purchase life insurance,” he said. “At this point in one’s life, the focus should be centered on saving for retirement, building a healthy emergency/down payment for home fund and/or paying off student debt. Typically, most companies will offer group-term life insurance equivalent to one time or two times salary as an employee benefit at no cost.”
But that changes once a spouse or partner and children come into the picture, as you want to ensure that they have enough money for living expenses as well as education. That’s where term life insurance comes in, Parisi said.
“For many people, term life insurance is the best choice because it offers robust financial protection at a budget-friendly price,” she said. “Term life insurance is an affordable and easy-to-understand type of life insurance that covers your beneficiaries for a predetermined number of years. You choose a term length that will help provide a financial safety net for your family during the years they need it most — for example, until the children are adults or the mortgage is paid off.” 
Joe Calvetti, a CPA and the founder of Still River Financial Planning, said a good strategy is to buy more than one term policy, each with different expiration dates.
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“Since your life insurance needs to peak when you first have children and decrease as you save and as your children become more independent, laddering term life insurance policies can be an effective strategy,” he said.
If, for example, you have a mortgage and young children to raise, you might want $750,000 worth of insurance. Instead of buying one 30-year term policy, you could buy three $250,000 policies — one with a 10-year term, one for 20 years and one for 30 years — to save money on the premiums.
How much does term life insurance cost? Insurance giant Progressive says a 10-year, $250,000 term policy costs $13.48 a month for a 30-year-old man, $16.31 for a 40-year-old man, $32.84 for a 50-year-old man and $74.82 for a 60-year-old man. The cost is less for a woman at each age level.
“For term life insurance, a simple rule of thumb is to purchase a life insurance policy that’s five to 10 times your annual salary,” Parisi said. “If you have substantial debts you might want to be on the higher end of coverage; if you have less, maybe you need a little less coverage. Additionally, you should choose a term length that lasts through substantial personal and financial milestones. For example, if you just bought a house, you may need a 30-year policy so coverage lasts the duration of your mortgage.”
It’s worth asking yourself whether you have adequate financial resources for your family should you die unexpectedly. If you don’t, life insurance is a consideration.
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