Once you start working and building your adult life, you have all new responsibilities and obligations. And that means you have to start thinking about morbid topics, like what happens to loved ones if you are not around anymore.
Many people do not get life insurance if they don’t have children, but it’s important to have a policy if anyone depends on your income. Below, what to expect when shopping for a policy and the answers to “do I need life insurance?” and “how much life insurance do I need?”
Who needs life insurance?
Once someone depends on you for your income – whether it’s a partner or an aging parent – you should consider a life insurance policy.
It’s especially important to have a policy when you’re young; since your career is just starting out, you likely have not built up enough savings, investment accounts, or home equity to provide for your loved ones if you pass away.
According to Nick Vail, a chartered retirement planning counselor with Integrity Wealth Advisors, life insurance is important for families.
“Even if you do not have children, you may wish to help your current or future spouse to pay off a mortgage or provide the funds to allow them to keep up their current lifestyle,” says Vail.
If your death would leave your partner or parent in a difficult financial situation, a policy gives you security and peace of mind.
For example, let’s say you have a partner and are a two-income household. You have a house together and joint expenses. and your incomes combined are enough to handle your bills and put a little away each month.
But if you pass away, your partner may not be able to afford the mortgage and other expenses on their own. If you have private student loans, you partner may still have to make payments on your debt. And in the weeks or months after your passing, they may be unable to work due to grief and the stress of making arrangements. That means they may lose your home and be in a really desperate situation.
A life insurance policy is an essential safety net in case the worse happens. It will allow your partner or loved one to grieve while providing for their expenses.
Where to find affordable life insurance
Buying affordable life insurance is easier when you are young and healthy, especially if you opt for a term life insurance policy.
“Many individuals fail to realize that it can get harder to obtain life insurance as you age. Getting it while you’re young, even if you don’t have children, can often mean locking in a better fixed rate for the long-term,” says Vail.
For example, the average annual cost for a $250,000, 20-year term life insurance policy for someone who is 35 and a non-smoker is $359.78. But if you buy a policy at 25, your policy will cost just $330.33.
To find a policy that fits your budget, check with your insurance provider for your renters, homeowners, or car insurance policy. Many companies offer significant discounts if you add a life insurance policy.
You can use Intelliquote to compare quotes from different providers to get the best deal.
How much life insurance do I need?
Many employers offer a life insurance policy equal to a year’s salary, but you shouldn’t rely solely on their policy to provide for your family’s needs.
“It’s important not to rely solely on group term or supplemental life insurance through your employer. If you choose to switch jobs or start your own business, you may not be offered the same life insurance benefits. Mixing in some private insurance can ensure that you will have that policy no matter where you work, as long as you keep up with your premiums” says Vail.
You likely will need more coverage than a year’s salary. To calculate how much life insurance you need, financial expert Suze Orman recommends taking how much income you need to replace and multiply it by 20.
For example, if your family needs $35,000 a year to live on, then multiply that amount by 20. You’ll need a $700,000 policy to cover your family in case of your death.
That formula assumes you have no substantial assets your partner or parent could use to pay for their living expenses. If you do have assets or investments, just subtract their total from formula total to get the total value you need.
Buying life insurance
No one likes to think about their own death or what their families would do without them. But planning now and preparing for the worst will ensure your loved ones are protected. It’s one of the most loving acts you can do for them.
If you’re thinking “how much life insurance do I need,” shop around and run the numbers to find the most affordable rates.
Interested in a personal loan?Here are the top personal loan lenders of 2019!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.
†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com
**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|5.47% – 17.67%1||$5,000 - $100,000|
|5.59% – 35.99%||$1,000 - $50,000|
|7.99% – 35.89%*||$1,000 - $50,000|
|5.99% – 24.99%2||$5,000 - $35,000|
|5.99% – 29.99%3||$7,500 - $40,000|
|6.79% – 20.89%4||$5,000 - $50,000|
|9.99% – 35.99%5||$2,000 - $25,000|
|6.95% – 35.89%6||$1,000 - $40,000|
|5.99% – 17.24%7||$5,000 - $75,000|
|9.95% – 35.99%8||$2,000 - $35,000|