4 Questions to Ask Yourself Before Buying Life Insurance

There’s no way to paint a pretty picture to help people understand the necessities of buying life insurance. The important thing to understand is that you don’t buy life insurance for yourself, you buy it for your loved ones. Life insurance is a foothold on reality for your spouse and your children in the event of your death.

It’s a reality of life we put off because we don’t want to think about the events that could make life insurance necessary.

But the problem is we still end up thinking about it, don’t we? Living without adequate insurance will slowly but surely creep into your mind, usually late at night when you’re trying to rest up for a big day.

1. Do I Need Life Insurance?

Do you own anything of value? Do people depend on your income for their own well-being? Will your assets or debts become a burden for your family if you’re not around? If you can answer yes to any of these questions, then it’s not a matter of if you need if insurance, it’s how much and what type.

2. Term Insurance vs Permanent Insurance?

We like to define term insurance vs permanent insurance with a simple analogy – do you own your home or rent it? With term insurance, you’re essentially renting. You pay a set amount each month for your coverage, whereas with permanent insurance the fees you pay add up and you essentially own your insurance policy. Term is cheaper but the fees can go up when the term expires, Permanent is more expensive but lasts forever.

3. What Do I Own?

It’s important to understand precisely what is covered by your insurance policy. Let’s say you own a three bedroom house in metro Vancouver. Add two vehicles to that mix and you’re on the hook for a hefty payment for the foreseeable future. Those monthly commitments differ from family to family, but regardless, insurance can help cover this cost for your loved ones during your working years.

4. So How Much Insurance Do I Need?

“A general rule of thumb is you should be covered for at least 10 times your annual income, so if you earn $70,000, you’d be looking at $700,000 in coverage.” That rule is borrowed from Sunlife Financial’s insurance section. The important thing to note is that no two situations are the same. People are easily stressed out because they don’t know what their lives will look like 20, ten, or even five years into the future.

And that’s ok. Term insurance can be an asset for a year or thirty and can be an easily affordable fee you’ll be happy to pay each month.

Either way, it’s time to ask the right questions about life insurance.

Categorised in: insurance

This post was written by Marco Faccone