September is national Life Insurance Awareness Month. And while it’s important to consider life insurance throughout the entire year, this “holiday” can be extra motivation to re-evaluate your current policy — or more importantly, look into buying one if you haven’t already. Here are some basic considerations.
Why do you need life insurance?
If you’re young or don’t have significant assets, you may think you don’t need life insurance. But life insurance is for everyone. It can help cover funeral and burial costs, and can help pay down any debts you owe so your loved ones aren’t left holding the bag. It can also provide a cash cushion for your loved ones to draw from as they adjust to life without you or your income. There are several different types of life insurance you can choose from to best fit your personal situation.
How much life insurance do you need?
Your life insurance needs will depend on a number of factors, including the size of your family, your financial obligations, your career stage, and your goals. For example, when you’re young, you may not need a large amount of life insurance. However, as you take on more responsibilities and your family grows, your need for life insurance grows too.
Some questions that can help you start thinking about the amount of life insurance you need include:
- What immediate financial expenses (such as debt repayment or funeral expenses) would your family face upon your death?
- How much of your salary goes toward paying current expenses and future household needs?
- How long would your dependents need support if you were to pass away?Do you want to leave money for other uses upon your death? Examples include funding your children’s education, gifts to charities, or inheritances.
- What other assets or insurance policies do you have?
Who will benefit from your policy?
When you buy life insurance, you’ll name a primary beneficiary to receive the proceeds of your insurance policy. Your beneficiary may be a person, corporation, or other legal entity. You can name multiple beneficiaries and specify what percentage of the net benefit each one will receive. If you name your minor child as a beneficiary, you should also designate an adult as the child’s guardian in your will.
Review your coverage.
Once you purchase a life insurance policy, periodically review your coverage. Over time, your needs will change, and you should adjust your coverage accordingly. In addition, keep a close eye on if and when your policy expires. In some cases, if you let your policy lapse, it might cost you more to buy a new policy, even if it has the same amount of coverage.
Anytime is a good time to think about life insurance — but September being National Life Insurance awareness month can be extra motivation to take another look at your current policy or explore buying a policy if you don’t yet have one. Taking these key steps now can go a long way in helping to protect your loved ones in the future.