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Most important factor is your dependents for Life Insurance
A lot of insurance advice seems to be based on your marital status to determine your insurance needs. That's not exactly the issue. The most important factor is if you have any dependents -- those who are (or who will be) counting on you to support them, either partially or fully -- and how many dependents you have. Here are other major factors to consider:
- · The kind of lifestyle you want to provide for your family.
- · Your non-working spouse, who wouldn't have an income if you died.
- · Your working spouse, who would "retire" to raise your children if you died.
- · Other sources of household income (such as a second paycheck).
- · Any debts that you want paid off (such as a mortgage, car loan or credit card).
- · Your family's college expenses.
- · Any special needs, such as a handicapped child or a child who will never be self-supporting.
- · Your parents, who may eventually become financially dependent on you.
Even if you're wealthy and think you might not need coverage, think again. You still may need life insurance if your taxable estate approaches $1 million if you're single or $2 million if you're married -- in which case you should have already done proper estate planning to minimize estate taxes. (For 2010 and beyond, the estate tax is repealed.)
If either of the above applies to you, and your estate doesn't have enough liquid assets to pay estate taxes, you need more insurance. The Internal Revenue Service will want cash from your estate within nine months, and you might have to invest in a life insurance policy to do this.
Childless now, but what about the future?
If you're married and don't have children, your insurance needs could vary from almost nothing to needing heavy coverage. If your spouse can live on his or her income alone and you don't have a mortgage or don't care whether it's ever paid off, your only need may be to cover any final expenses incurred at your death.
You still should consider the possibility that your parents may depend on you in the future, or that you may want to help pay for college costs for a family member (a niece or nephew, for example).
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