If you want to retire early, you need to cut down on every expense you can to get the goal reached, right? Of course. But this begs the question of whether life insurance is worth the capital outlay when you’re already trying to sock away every extra penny for your future nest egg. The problem is compounded by different plans from different companies, and the whole process can become mighty confusing – and very discouraging – if you don’t even know if it’s worth buying. Evaluating your life insurance needs is easy; all you need to do is answer a few key questions to determine if it’s a necessary expense or one you can cut from your budget.
Who’s Going To Need You?
If you’re looking to cut expenses any way you can, then cutting out a monthly life insurance bill may be one good way to help get your budget down to a shoestring. A good rule of thumb is to decide if anyone in your family will be negatively impacted financially if you died today. If your kids are out of the nest and they are self-sustaining, then that’s helpful. But if you still have a spouse that needs your income to make it each month, then you should consider keeping your life insurance plan for now.
What Kind of Life Insurance Do You Need?
The answer to this question really depends on why you need life insurance. If you want a plan because your spouse and/or dependents will not be able to make it each month without your income, then consider opting for a term life plan that only covers the time period until your significant other will be able to go it alone. For instance, you may want to keep your term plan until your spouse’s retirement kicks in.
If you want a plan because you would like to have an asset to pass on when you die, then you may want to consider a whole life plan. Whole life insurance policies have suffered a terrible reputation in the financial world in recent years, but not all plans are evil. However, it would still be a good move to only consider plans from large, well-known insurance companies.
How Long Do You Need Your Plan?
Make sure to evaluate the reasons you need your life insurance policy, and only take it out for the exact time period you anticipate needing it. This way, you eliminate the extra expense for something you don’t necessarily need to have. The name of the game is reducing expenses, after all, and making a smart decision about whether you need life insurance is a great way to do that.