Why Do I Need Life Insurance? | Pacific Wealth Solutions

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Why Do I Need Life Insurance? How Much Do I Need?

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Young couple and bank manager reading financial reports while having a meeting in the office.

If you’re wondering about the need for life insurance, you’re not alone. This common question is asked by many people every year and the answer lies in another question—Will someone I love be negatively financially affected when I die? If yes, then the answer to whether you need life insurance is also yes.

Let’s expound on this thought…

  • Who will assume your debt (home, personal and auto loans, credit cards, etc.)?
  • Can your family afford to pay the funeral, burial/cremation costs out of pocket?
  • Will your spouse and/or children have the money they need to live on (and pay for college) without your income?
  • Do you own a business that relies on your credit to keep it running? 

While thinking about the answers can be uncomfortable, they help you understand why you need life insurance. It’s to financially protect the people left behind when you pass away.

Here are a few more frequently-asked questions about life insurance that you’re probably curious to know the answers to before you sign right up.

How Much Term Life Insurance Do I Need?

Knowing how much term life insurance you need is helpful in estimating how much a policy will cost you. Policies typically come with either a 20-year or 30-year term. If you die during that time, your beneficiaries receive the payout. If you don’t, then they get nothing and you are out the money you paid for the policy. Term life insurance is perhaps best thought of as a backup before you are essentially self-insured by your assets and lack of debt, which deems life insurance almost unnecessary.

Use the following calculation to determine how much term life insurance you need:

Annual income + 8% to account for inflation (x number of years until retirement) + Debt including interest

A different, simpler method is:

Annual income x 7 if you are single or have a working spouse, or by 10 if you have multiple dependents

How Much Whole Life Insurance Do I Need?

To know how much whole life insurance you need, it is helpful to look at the grand financial picture of your life because whole life insurance accrues interest and pays out annual dividends. Do note that there may be other better investments than whole life insurance, so if you were to put the same amount of money into an index fund, you may get higher returns.

To determine how much whole life insurance you need, use the same calculation above for term life insurance. 

When Should I Get Life Insurance?

The quick answer to when you should get life insurance is…as soon as possible. Here is more of an explanation for why that is the case. 

Sure, it’s less likely you’ll die before you reach old age, yet death does come to younger people every day and you are more likely to have dependent children during your 20s or 30s. Additionally, purchasing a policy is quite a bit cheaper when you’re younger. 

Don’t take these two reasons to mean that it may be too late if you’re an older individual. Yes, it will cost more, but the investment will still be worth it for your beneficiaries’ sake if you aren’t already in a healthy financial spot. 

How Do I Get Life Insurance?

Getting life insurance is a relatively simple process, often without even the requirement of getting a medical exam. All you have to do is request a free quote and Pacific Wealth Solutions will help you find and compare providers that are eager to help you reach your financial goals!

Step 1: Apply Now

Step 2: Create an account.

  • Manage your policies and investment accounts.
  • Get help from MassMutual directly, or you can always contact PWS via live chat or email on our website.
  • Set preferences and notifications. Get helpful financial resources.

Step 3: Submit the application.

  • Sign in to your account and finish your application. 
  • Submit the application and wait for the approval.