3 signs you might need life insurance, according to a Certified Financial Planner
Life insurance can help your family and dependents cover important expenses, such as childcare and mortgage payments, in your absence.
But even if you’re convinced of this financial tool’s usefulness, you may still feel confused about when to prioritize its purchase. Here are three signs you might want to consider taking a weekend or so to start shopping for a policy.
You have people who depend on your income
Whether it’s your spouse or young children, having people in your life who depend on your income is a sure sign that you need to consider life insurance.
“It serves many purposes, but it’s traditional if someone else is really dependent on you financially,” says Eric Kirste, a certified financial planner at Savvy Wealth. Life insurance can assist your family by providing money, called a death benefit, if you pass away while covered by a policy.
There are two distinct types of life insurance to consider in this scenario:
- Term life insurance covers you for an amount of time specified in the policy, generally between 10 and 30 years. After that term expires, there’s no coverage, but this type of life insurance is generally more affordable than a permanent policy.
- Permanent life insurance stays in force for your entire life and can accumulate cash value, an amount that earns interest and can be borrowed against for future expenses.
One of the biggest differences between term and permanent life insurance is the cost. “Term insurance serves a temporary need, and it’s cost-effective,” Kirste says. Term policies are meant to cover temporary situations, like having young children or a mortgage, for example. Permanent life insurance is more expensive and meant for those who want to leave an inheritance to children or build cash value in the policy to use later in life.
Though finding the right life insurance plan can be tricky, we’ve done some of the hard work for you. CNBC Select rounded up the best life insurance companies and picked out several that stand out from the competition. Some of our top picks include State Farm for its standout record of customer satisfaction. Guardian also ranked highly for term life insurance out of the many we reviewed.
Life insurance is a way to make sure that your family or partner is protected financially if you die. It’s especially helpful if you have large debts like a mortgage, or have people who depend on your income or work at home to live life well.