Life Insurance: What’s Best for You?

Life insurance is an important way to protect your loved ones financially after you’re gone.

In exchange for your premium payments, the insurance company promises to pay a specific amount to someone you choose (your beneficiary) when you pass away.

The right life insurance coverage brings peace of mind, knowing that your family will have financial support during a difficult time.

Why Do You Need Life Insurance?

Support Your Family

If something were to happen to you, your family could face a loss of income. Life insurance helps replace that income, providing your loved ones with cash right when they need it most.

Cover Debts & Expenses

Life insurance can also help pay off debts you leave behind—such as a mortgage, car loans, or credit cards—without forcing your family to sell other assets. It can even cover funeral costs and any estate taxes, so your loved ones don’t have to worry about extra financial burdens.

Leave an Inheritance

A life insurance policy can be a way to create an inheritance for your children or loved ones. You can also use it to fund important expenses, like your children’s education, or make charitable contributions.

How Much Life Insurance Do You Need?

Your life insurance needs depend on a few key factors:

• Do you have dependents or a family to support?
• What financial responsibilities do you have (like loans, mortgages, etc.)?
• What are your career goals and financial objectives?

For example, when you’re young and single, you may not need much life insurance. But as you start a family or acquire more responsibilities, the need for coverage increases.

It’s also worth noting that life insurance is typically more affordable when you’re younger and in good health. A financial advisor can help you determine the right coverage for your situation.

The Changing Landscape of Life Insurance

As of January 2024, only 51% of American adults reported owning life insurance, a noticeable decline from 63% in 2011. This decrease is due to a combination of factors, including shifts in the economy, rising premiums, and changing consumer attitudes. More people are postponing or forgoing life insurance as they prioritize other financial goals, or as they feel less inclined to purchase traditional policies due to the availability of alternative financial products. Despite this, life insurance remains an essential tool for providing financial security to your family.

How to Figure Out the Right Amount of Coverage

Here are a few questions to guide you:

• What debts or expenses would your family need to cover if you passed away (e.g., mortgage, credit cards, funeral costs)?
• How much of your salary is used for daily living expenses and future needs?
• How long would your family need support if something happened to you?
• Would you want to leave any special gifts or savings, like funding your children’s education or making a charitable donation?

As your life circumstances change, so will your need for coverage. Be sure to check your life insurance needs regularly.

How Much Life Insurance Can You Afford?

Balancing how much coverage you need with what you can afford is essential. The cost of life insurance depends on factors such as:

• The type of policy you choose
• The amount of coverage you want
• Your age
• Your health (e.g., smoking or medical conditions)

Your life insurance premiums should fit your current and future financial situation. If you need guidance in selecting the right life insurance coverage for you and your family, the Smith Patrick team is here to help.