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When Do You Need Life Insurance

The primary purpose of life insurance is to provide a source of income, in the event of one’s death, for children, dependents, or other beneficiaries. Life insurance can also serve certain estate planning purposes, but are beyond the scope of this article.

A decision to buy life insurance depends on whether there are dependents. If one has a spouse, child, parent, or some other individual who depends on their income, then life insurance is needed.

The younger the children, the more expensive private schools and universities where they will go to school, the greater annual expenses are and the more debt one has, the more life insurance is needed. If both spouses earn income, then both spouses should be insured, with insurance amounts proportionate to salary amounts. Flat annual premium level term insurance is the best type of insurance to obtain in most situations.

If one spouse does not work outside the home, insurance should be purchased to cover the absence of the services being provided by that spouse (child care, housekeeping, bookkeeping).

If the surviving spouse could live comfortably without the other’s income, meaning one may have self-insured by saving, then you will still need life insurance, but less is needed than someone who has more dependents and greater expenses. At a minimum, a provision for burial expenses and paying off debts will be needed.

If the surviving spouse would undergo financial hardship without one’s income, or if adequate savings have not been accumulated, there may be a need to purchase more insurance. The amount will depend on salary level and that of the surviving spouse’s realistic earnings ability as well as on the amount of savings that have been accumulated in addition to the amount of debt that has been accumulated.

For further information, contact Diane M. Pearson, CFP™ at (412) 635-9210 or

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