Do you know what questions to ask before buying life insurance?
- How much income would your spouse and your children need to replace your income over a period of years based on your current age?
- Will your spouse or guardian need to provide childcare support?
- Is there a mortgage to pay off?
- Are there substantial short-term debts, like credit cards or auto loans, to pay off?
- What are estimated college expenses for children and spouses, and when will those expenses start?
- How much will burial expenses be?
- Do you have any other life insurance?
- Are there anticipated caregiving expenses for elderly relatives, children or family members with special needs?
- Do you anticipate substantial estate taxes when you die?
- Do you have any other assets that can be liquidated sensibly or will bring in income?
Most online life insurance calculators can help you address questions 1-8. The last two questions require a bit more strategic thinking in terms of what you or your spouse have done with overall estate planning. Keep in mind that youth and health will also be factors in how much insurance you can afford to buy. A financial planner can help you determine the right insurance products to buy based on your needs and other assets.
One more thing. Don’t buy insurance and forget about it. Make sure that every few years you are reviewing your insurance purchases as part of your overall financial plan. Life circumstances change – incomes rise and fall and family size changes. Your insurance holdings always need to reflect current needs and conditions.