Cost & Coverage
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Life insurance offers your family financial protection and assistance when you’re gone
Buying life insurance when you’re young can save you a lot of money
Life insurance can help cover any debts you might leave behind
A wide variety of scenarios warrant buying life insurance, but the simplest rule of thumb to determine who really needs life insurance is: Does anyone rely on your income for their financial wellbeing? This could be a child, spouse, aging parent or even the cosigner of a student loan who would get stuck with the debt if you weren’t around to pay it off.
If the answer is yes, you probably need life insurance.
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Life insurance replaces the financial support you give to others in the event you’re no longer there to provide for them.
Take a look at the table below to see if you are a likely candidate for life insurance.
|You are a…||How life insurance can help|
|Parent||Helps with everyday costs, along with saving for college tuition and other milestones in your child’s future.|
|Spouse||Makes sure you’re covered if you have a mortgage that requires both partners’ salaries for the payments, or if one partner earns the lion’s share of the income to support your lifestyle.|
|Student||While federal student loans are forgiven if the borrower dies, private student loans transfer the debt to the co-signers. Having life insurance can keep them from being stuck with the debt.|
|Entrepreneur||If your business would cease to exist without you, naming a business partner as a life insurance beneficiary could be helpful. The death benefit can also be used to buy out any remaining shares of the business.|
Still curious if you need life insurance? Take a look at this flowchart to see where you fall.
You may be thinking there’s no sense in purchasing life insurance while you have no dependents. But by buying life insurance when you’re young, you can make your coverage last longer for the money. As Patrick Hanzel, Policygenius’ Advanced Planning Specialist and Certified Financial Planner points out, “If someone knows or expects they will have an insurable need in the near future, we recommend locking in coverage while you are younger and (usually) healthier. I recommend owning coverage as you would five years from today."
Take a look at the term life rates below to see how they increase decade by decade.
Methodology: Sample based on a 20-year term life insurance policy for a non-smoker male in Preferred health rating.
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If you are young and have no dependents, consider whether you have outstanding debts or if your loved ones can afford the cost of unexpected funeral or medical expenses if you die. The average funeral costs $8,000-10,000. Your beneficiaries can use the death benefit to cover those expenses. If you become sick or injured and need medical care, the death benefit can be put toward any costs that health insurance does not cover.
Did someone cosign a loan for your home or car? Just like a student loan, they’ll be responsible for the remaining balance if you die. A life insurance death benefit can cover that outstanding debt for your cosigner as well.
Even if you won’t need the full coverage amount to cover final expenses and debt, the remaining balance could provide financial security to your loved ones or even be donated to a charity of your choosing.
Once you’ve determined that you need life insurance, the next step is to calculate exactly how much coverage you need. A general rule of thumb is to multiply your income by 10-15. So if your current salary is $50,000, you can estimate that you’ll need $500,000-750,000 in life insurance coverage.
Parents or soon-to-be parents should include the cost of raising a family in their calculations as well. Depending on the age of your child, you’ll need to account for everyday expenses, education costs, and potentially childcare or housekeeping in addition to your income.
If you have outstanding debt from student loans, a mortgage, or some other lending agreement, add those to the amount of coverage you’ll need. The death benefit can help your family stay in your home if you can no longer make payments on it and protect them from making difficult decisions about any debt you leave behind.
Not everyone needs life insurance, even if they play an important role in their families’ lives. Here are a couple examples of people who usually don’t need term insurance:
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