The Basics of Life Insurance

 Do you need life insurance?

Do you need life insurance?

It's true that sitting around thinking about what would happen to your family if you died is not as pleasurable as say, binge watching Netflix or going out for ice-cream, but it is something we need to take a little time to think about. A few minutes of planning and organization now can save your family a huge amount of stress and hassle in the event of a tragedy.  Once you throw children into the mix, a conversation about life insurance is as important as any conversation about childcare, sleep training or diet. Children need to be provided for and it's your job to figure out how, even in the event of your death. 

 

What type of life insurance should i buy?

There are two types of life insurance policies, term and permanent. The difference being one is only active for a set amount of time and the other is, well, permanent.

For most new parents, term life is the way to go, providing a way to support a spouse and children if they were to be without your paycheck. Permanent life insurance tends to be used by individuals who want it as part of their overall estate planning needs, a way to pass assets at the point of death rather than a source of income replacement. 

 

How much do I need?

Working out how much life insurance you need is not as difficult as you might think. There are many online tools and calculators to help you, but beware of estimates provided by insurance companies; it's in their interest to sell you as large a policy as possible so expect their numbers to be a little inflated.

We love the calculator at nerdwallet.com which will generate a number for you based on your income, savings and comfort level (how able is your family to replace your income).

 

Buying life insurance

Many people are offered life insurance through their employer and this can be an easy way to get started. However, these types of policies often don't provide adequate coverage and also will likely be fixed to your employment; if you move jobs you will lose the policy. We suggest using an online comparison site such as quotacy.com to compare quotes from multiple providers.

If you decide to go with a broker, make sure they work with more than one company to provide you with a variety of quotes. Once you have your quotes in hand, be sure to check out the provider on a rating service such as Moodys or A.M Best which gives insurance companies easy to understand ratings. This should help you find a reputable company that will continue to meet your needs for the life of the policy.