Early Career Insuring
Until recently, you may not have had a need for insurance, as you may have been covered under a family policy or other means of coverage. Now that you’re early in your own career you’ll need to start owning your own insurance coverage. To do that, you’ll need to know some insurance basics.
Do I Need Insurance?
Insurance is about managing risks. Sometimes coverage is mandated (if you want to drive a car, your state may mandate that you purchase car insurance). Sometimes insurance coverage is widely purchased but not mandated by law, such as having catastrophic (“major medical”) health insurance to help prevent a serious medical injury/illness from becoming a serious financial burden. And, sometimes coverage is by choice. Personal life insurance falls into this last category.
It’s important to realize that when something is by choice that doesn’t make it any less important. You have to know your needs and look out for your best interests. Many people choose to buy life insurance to cover their family’s financial interests even though they’re not legally obligated to buy it because it helps them manage a major financial risk.
How Can Life Insurance Coverage Help a Family’s Financial Needs?
Life insurance companies sell policies to many people. Only very few will file a claim each year. Although the insurance company (through its data and experience) knows with some precision how many of its many life insurance customers may die in any given year, no one knows who will die.
The death of a household income earner may present a catastrophic financial situation to a young family which relies on that income to pay monthly bills and pursue all of the goals family members dream of pursuing.
That’s where life insurance comes in. The death benefit from a life insurance policy is used to replace the income of the deceased family income earner, providing the financial resources to allow family dreams to continue to pursue their goals and dreams. Imagine the profound disruption to the family without that coverage.
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What Type of Life Insurance Do I Need?
It’s up to the parent (is that now you?) to assess if the need for life insurance exists (if someone is financially dependent on you and you are not independently wealthy, you probably should consider buying life insurance). What type of life insurance (term life insurance or permanent life insurance), how much coverage you (your dependents) may need, for how long, etc. are all features to consider when you shop for life insurance coverage early in your career.
You can get an idea of how much life insurance coverage you may need by using this free calculator.
Shopping for life insurance may be facilitated by using a financial professional. You’ll pay the same whether you shop for it yourself or use the help of a financial professional because life insurance premiums are regulated by your state. The benefit of using a financial professional is that the financial professional may help you ask questions you did not know to ask, may have insight you do not have, and may make suggestions you would not otherwise consider.
Takeaways About Life Insurance
- It’s used to manage life’s risks
- It’s not “for you” but for those financially dependent on you
- It’s a form of emergency planning.
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How financially literate are you compared to the average American? You can take one of the shortest of those financial literacy quizzes here (it’s only 6 questions) to get a taste of the questions asked.
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