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I’m a financial planner, and I always recommend life insurance to 4 types of people


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If anyone depends on you financially, it’s probably a good idea to get life insurance. As a financial planner, there are four groups who always need this type of coverage.
Parents and couples who share finances should get life insurance to cover their loved ones in the event of one person’s passing.
Homeowners should also get life insurance to cover their share of the mortgage, and business owners should get enough life insurance to cover their share of the business.
Policygenius can help you compare life insurance policies to find the right coverage for you, at the right price »

Life insurance is traditionally purchased with the intention of providing an income stream for your loved ones in the event that you die unexpectedly. Life insurance proceeds pass to any named beneficiaries tax free and, at a minimum, should cover your children, your spouse, and anyone with whom you’ve accumulated a significant amount of debt or equity.

As a financial planner, I always recommend life insurance to four types of people.

Parents

The very first step in the process of purchasing life insurance is to determine who it should cover and what life events or expenses you would like it to cover them for. If you have children, you likely have big plans for them and what they will accomplish by the time they are adults.

You may not only want to provide for their college education, but for their primary and secondary schooling as well. You would want to do your best to estimate what those costs will be over 18 or 22 years with inflation. Then, purchase a policy that spans that entire time period.

Couples who share finances

If you have a spouse, you have likely built up a lifestyle that is based on your combined incomes and your collective buying power. Conversely, if you have a spouse who does not work outside the home or they earn significantly less, you may want to provide enough of a future income stream that they are still able to meet their basic needs if you were the first one to go. In either case, you will want to estimate what your income contribution to your household is today, as well as what it is expected to be in the near future.

There are several methods that the insurance industry uses to determine the right amount of coverage for an individual or family. However, a widely accepted rule of thumb to determine a minimum coverage amount is to take a person’s after-tax income and multiply by 10. Though the equation is not perfect, that would reasonably imply that at a minimum, you have provided 10 years of income replacement for your loved ones.

Homeowners

In addition to replacing your income, you would want to have enough life insurance in place to pay off any large debts you are responsible for, such as a mortgage. Whether it’s a married couple, siblings, or anyone else who

Source:: Business Insider

      

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