Life insurance — an insurance policy that will provide income for your loved ones if you die — is highly underused. According to nonprofit LifeHappens.org, over 40% of the American population doesn't have it.
"It's very important if you have any dependents, whether that be young kids, a spouse that's not working, or any family member who depends on you for income," Meaney explains. In most cases, life insurance for children is unnecessary.
There are two primary kinds of life insurance: term and permanent. "Term is much less expensive," Meaney explains. "It is often used by young families that want to get some coverage in place, but don't want to spend on a policy that can last for a lifetime." You choose to buy it for a certain time span, whatever makes the most sense for you and your family, and after that set amount of years, it expires.
Permanent insurance, on the other hand, lasts for your entire lifetime. This might be a good option for people who need cash flow at their death no matter when that happens, Meaney explains. For example, if you own a business and all of your assets are tied up in the company, if you die, your family will need cash to be able to pay state taxes — otherwise, they'll have to sell the business.
You'll stop needing life insurance when your dependents are no longer relying on you for financial support. For that reason, term life insurance tends to be a better fit for many parents, whose kids will grow up and become financially independent.
It's important to put in research or consult a professional to make sure you choose the ideal life insurance for you — otherwise, you could waste a lot of money and still leave your family unprotected.
You can calculate your coverage needs at lifehappens.org. Again, many people will be able to get coverage through their employers, but not always as much as they need. Some experts recommend replacing up to 10 times your annual income.