One of the best things you can do for the generation after you is to plan ahead. The world is changing faster than most of us can keep up with, so a bit of planning is better than no planning at all. Sometimes, it can even mean the difference between a successful life and one full of struggles that could have been avoided. At the very least, you certainly don’t want to leave the next generation worse off for having to deal with any debts you may have left behind. Your life insurance policy may be the legacy you leave behind. To that end, you need to consider what your loved ones will deal with when you pass.
Whole or Term?
While it’s important to consider what you leave your loved ones, don’t go so far as to infringe on your current quality of life. Life insurance is there to help your loved ones when you die, but it can also be a great investment while you’re alive, depending on the type of insurance you choose.
Whole life insurance is life insurance that lasts as long as you are alive and making payments on it. It’s also a great investment for the here and now because you can borrow against the policy, if you need to. The payments stay the same, so 30 years from now you will still pay what you do today. Just take a look at how the price of things have changed in the past 10 years and you’ll see what an asset that is.
Term life insurance lasts for the term you designate, usually in 10 year increments. These policies are the ones people tend to invest in later in life. However the payout is the same no matter when you die during the term of the policy.
Amounts to Consider
One of the hardest decisions to make about life insurance is how much your policy should cover. You can’t just pick a random number out of the air. Instead, you need to consider exactly what you want your life insurance to do.
Debts: Add up all of your personal debts and make sure you at least have enough life insurance to cover them. In some cases, there may be insurance on your debt through your lender to cover the remaining amount left, should you become disabled or die during the life of the debt. If you have such a policy on your debts, exclude them from the total.
Children: What kind of plans do you have for your children? Experts say that in the event you plan for your children to go to college, they will require $100,000 each. However, even if your children don’t plan to go to college, that’s still a good amount to consider because it could go a long way toward helping them start a business or buy a home.
Funeral: It’s best to either pay for your funeral expenses up front, or have them included in the payout of your life insurance policy. The last thing you want to do is make your death a financial burden on those you love.
Yearly Contributions: If you have a spouse or loved one who relies on your income, be sure to plan for that. They will need time to grieve without worrying about monthly expenses. Plan for about 10 years worth of your contribution when you decide just how much you want your policy to be worth. This way, they can pay off some household debts early or at least know they have some time to plan for the future financial situation.
The more thought you put into your life insurance policy, the better off you leave the people you love. Death is a painful process for the ones we leave behind. There is no need to add financial burdens to that process.
