My company’s group life insurance is all I need.
Employer-based life insurance is helpful, but it’s often not enough to meet your personal financial goals. For starters, the limits of employer-based life insurance are generally one to two times your annual salary. If you have others who depend on you financially, many experts recommend that your life insurance coverage be worth five to eight times your salary. Second, employer-based life insurance coverage may end the minute you stop working for that employer—so if you’re laid off or decide to leave that job, you’ll be without coverage until the benefits from your new job kick in. That’s why your own personal life insurance policy is best—it complements any life insurance you get through your workplace.
I’m too young to need life insurance.
Even if you’re not yet married or have dependents, one day you might. You’ll get the lowest rates on life insurance when you’re young and healthy. If you wait to buy, rates will most likely be higher as you get older and you run the risk of developing a medical condition that will make life insurance more expensive or unobtainable. Establishing a life insurance policy as soon as you can afford to and locking in low rates for as many years as possible is smart.
I have no dependents, so there’s no reason for me to buy life insurance.
You may not need to provide financial support for children, a spouse, or elderly relatives, but when you die, someone has to pay for your funeral and burial costs, which can amount to $10,000 or more. These expenses are called “final needs,” and your agent can help you set up a low-cost life insurance policy that will cover them. Also, remaining debts will generally be settled against your estate. If you want to leave your home or valuables to relatives, a life insurance policy can help ensure they can pay off any debts and keep those things in the family.
Only the breadwinner needs coverage.
A spouse who cares for the home may not receive a traditional paycheck, but his or her work is critical. Without the homemaker, the surviving spouse would likely have to pay for daycare and hire someone to help with numerous household chores. To determine life insurance limits for a spouse who works in the home, consider everything he or she does, calculate the cost of hiring someone to do those tasks, and multiply that amount by how many years the breadwinner would need to support the children financially.
I have enough life insurance.
For many people, “enough” means not just covering your family’s daily needs but also paying off your debts and providing for your children’s education. Under this notion, be aware that as your life circumstances change, the amount of life insurance sufficient to cover your personal needs may also shift. Major life events such as marriage, having kids, or buying a house usually call for additional coverage. A new job or your child’s college graduation can also cause your personal needs to change. Most insurance companies suggest an annual policy review with your agent to ensure your coverage reflects any significant changes in your life.
Your AAA life insurance specialist can provide more information. Visit your local AAA branch, call (866) 298-5324, or go to AAA.com/life. AAA life insurance specialists do not provide legal, tax, or financial advice.