Do I Need Life Insurance?

Life insurance is a critical component of many financial plans. For most people, the answer is yes, you need life insurance. If there are individuals who are dependent on you for financial support and you predecease them, they will need the proceeds of a life insurance plan to ensure they are taken care of. This includes expenses like college for your children, paying off a mortgage, or creating an income stream in retirement for a spouse.

If you are retired and have enough income coming in from sources that will continue even if you pass away, or if you have enough assets to provide plenty of income for your survivors when you are gone, you may not need life insurance. However, for most people, the financial burden that would be left behind is more than they currently have covered. The question then becomes, How much life insurance do I need? You need to determine how much income is necessary to cover their costs in the event that you pass away, along with how much income they would have coming in. The difference between those two figures is the income gap. The life insurance policy that you purchase should provide enough income to cover that income gap so that even if the worst were to happen, you would still have met the needs of your loved ones.

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Steve Marbert is a CFP® and the President of Richard Young Associates, and is a Dave Ramsey SmartVestor Pro. Want to learn more about him and our other advisors? Find out more here.