What happens to us when we die? It’s an age old question that none of us will know until we get there. The question we should know the answer to is, “What will happen to our loved ones when we die?” Unfortunately way too many people choose to ignore the latter question because they are afraid of the former. To help as many people as I can understand the need and how to get life insurance I put together this guide.
Why do I need life insurance?
Try not to think of life insurance as planning for your death. Think of it more like a gift to the people that rely on you financially or would be inconvenienced financially were you to pass away. In my case my family’s lifestyle would be impacted greatly if I were to pass away. If you read my blog regularly you know we are making pretty good money so I took out a $2.5 million policy on myself so that if anything happens to me my wife will be able to spend her time mourning and keeping the boys lives in order, as much order as possible. She will not have to think about how the mortgage gets paid or how to make ends meet. If you do not have someone that is directly dependent on your income then you will want a small policy that will make it easy to take care of any financial obligations you may have (debt, funeral, etc.). This will make it easier for the executer of your estate to clear up any final expenses.
How much life insurance do I need?
I get this question and the answer is always, “It depends.” It depends on how much you are making, what your financial obligations are, and how much debt you have. As a rule of thumb, most people will get about ten times their annual income. This will typically leave enough money for a spouse to get the finances straightened out and still have plenty left over to replace your income.
If you have large amounts of debt then you may want to increase that number to make sure that you wipe out all the debt your family has and still have a sizeable nest egg for your family. Of course you do not want such a large policy that you have to sleep with one eye open at night.
If one person in your family is a stay at home parent then you will need a decent size policy on them just to cover the cost of all the duties they take care of. It is hard to estimate the cost of shuttling kids, cleaning, etc. but you know that if you had to replace that person there is a significant cost. I frequently see families get between $250 and $500 thousand dollars of coverage on a non-income producing spouse.
Finally if your personal obligations are small and you just need to make sure your estate and final expenses are taken care of, you can look at a policy that is tailored to just your needs. I have seen people purchase as low as $20k worth of life insurance just to tie up any loose ends.
How do I get the best rates?
The key to getting the best rates on life insurance is to get a great set of quotes. What is great about life insurance is that the policies are pretty standardized from one company to another. So when you look at $500 thousand of life insurance from company A, you can be pretty sure that you are looking at an almost identical policy for $500 thousand from company B. That being said it is best to work with an independent agent who can shop all the companies that offer coverage in your area. That is why all the quotes that are offered on our site come from a top independent agent that I have personally vetted. You can learn more about getting the best life insurance quotes or go ahead and run a set of quotes for yourself with no obligation by using the form on this page.
How do I know I am using a good company?
What I liked most about the quotes you are getting from the tool on my site is that you only get top rated carriers. This means that they pass standards for financial stability and for fulfilling the claims necessary. Since for most people, it is hard to understand what that actually means I also put together a list of who I consider to be the best national level life insurance companies. Keep in mind that the life insurance quotes you get here may include some other more localized companies when you get your own quotes.
I really hope all this information helps you to make the best life insurance decision for you and your family and that you will take this very important step with your finances.