We definitely need life insurance!
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.
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I only had a minimum value policy when I was in my 20′s. It was enough to pay off my mortgage. Now that I have 2 children, I do 10x my salary and so does my husband..actually I think he does 9x. If something horrible happens to us and we die, the last thing I want my children to worry about is how the bills will be paid.
I have around 10x my salary as well. I’ll have to figure out something else when I leave the corporate job. 10x salary will be a pittance then.
I have around 10X salary now but intend on dropping that lower once the kids are out of college. Insurance is to protect your family and let them live the life they would have had you been around, not make them rich once they’re already functioning adults.
I agree completely. That’s what my dad did when we were young and now he doesn’t have life insurance anymore.
I have two young kids, so my husband and I definitely have life insurance; but I was shocked to talk to my parents this week and learn that they don’t have life insurance – it makes sense, they’re in their 60s now, so I guess it’s really run its course for them. Just funny to think that’s what is deemed a financial necessity if you’ve got young children isn’t once those kids have grown up and most (hopefully all) of your debts are gone!
My parents dropped their health insurance too. They don’t need it anymore at this point and I think it gets more expensive as you age, right?
Life insurance is a necessity if you have a family and especially if your spouse does not work. It is important to have enough life insurance coverage to continue to life style your family is currently living and cover the college education for all your kids. Usually ends up more than 10x your salary.