Life Insurance - When, What Type and How Much?

Buying life insurance is something that many people can find themselves procrastinating about. The risk of waiting too long is that it can become costly, or perhaps no longer available due to changes in health. People are afraid to talk about their own mortality, and can be confused about how much and what kind of coverage they need, and what life insurance can cost.  Unfortunately, putting off life insurance conversations and purchases can result in families being left with a significant amount of expenses. Life insurance helps form a strong foundation to a financial plan - So when is the right time to buy life insurance, and what should you consider before you buy?

Age 

When asked when the perfect time to buy life insurance is, the first thing most people think of is age. The truth with life insurance is simple, the older you get, the more likely you are to become ill and the higher your risk of mortality, so your rates for life insurance will increase as you age. When it comes to buying life insurance, sooner is always better than later. Does this mean you should not purchase life insurance if you're already past a certain age? No!  It is always worthwhile to have a conversation with a financial advisor about life insurance solutions at any age.

Debt Level

Current and future debt is an important factor when deciding the need for a life insurance policy as well as the value you will need to take out. The amount left owing on your mortgage, credit card balances, loan debt, and burial expenses can all add up to be quite costly.  Want to leave a family cottage to family members? The capital gains taxes may be daunting to the recipients and could force the need to sell the cottage; a life insurance benefit for that purpose could help. Life insurance is crucial to so your family is not left with a cost they cannot afford, while at the same time grieving with the loss of a loved one. 

Average Income

Many couples and families rely on a two-person income to support their families and provide the life they have always wanted. This means that if one of the spouses passes away unexpectedly, the family will be left with a need. Sometimes the loss of one spouse's income is too much to overcome, and many families end up having make lifestyle adjustments. A life insurance policy can help cover the income that the spouse used to bring in at least for several years so that the family has time to make adjustments to be able to accommodate the future lack of income.

When determining the benefit amount you need, it's important to make sure that it will cover your salary for at least a few years. Look at current family costs, plus expenses that are planned for the future; the cost of childcare may be a current cost you factor in, while funding university may be a future cost you will want to calculate into your desired amount of insurance . If one spouse is a stay at home parent, you may also want to consider a life insurance policy for them to fund childcare and other expenses you may need to pay for in their absence.  

Type of Insurance Policy

Do you buy term insurance, permanent insurance, or some of both? Those decisions are best determined by speaking with a financial advisor with experience in providing life insurance. How long you'll want the insurance for,  the amount of premium, and what you need the insurance for all factor into the type(s) of insurance to purchase.

If you’re an entrepreneur responsible for protecting your business and your family, consider protecting your company with term life insurance (for small businesses and start-ups) or permanent life insurance (for more established companies).

Getting ready to transition out of the workforce in the next few years? You may want to prepare to leave a legacy with permanent life insurance.

Premium Cost

The fact is that the longer you wait to start your policy, the higher the rate of premium you will pay. Working with a financial advisor is the best way to maximize your insurance coverage while keeping the premium at a level that is comfortable for you.  Financial advisors have access to various companies' software and can help you find the best combination of coverage for your needs.