Life Insurance on a Tight Budget

When money is tight, consumers cut back on expenses that don’t have an immediate payoff, so it’s not surprising that Americans are skimping on life insurance. But that doesn’t make it a good idea. There are ways to keep insurance costs down when the budget is pinched.

LIMRA, a research organization for the insurance industry, recently reported that 30% of U.S. households have no life insurance, up from 22% in the last survey, conducted in 2004.

“Among households with children under age 18, which arguably have the greatest need for life insurance, 11 million have no coverage,” LIMRA reported.

“More than 40% of Americans say a major reason they have not bought more life insurance is because they have other financial priorities right now, such as paying off debt or saving for retirement,” LIMRA said, citing its survey.

So where should life insurance fit into the big picture? Do you need it, and if so, how much is appropriate?

The answer to this question really depends on your dependents. If you have children under 18, seriously consider getting life insurance, unless you have enough savings and investments to pay their expenses until they’re grown up.

People with non-working spouses or partners should generally also have insurance, as should those caring for elderly parents. Just imagine how much money your dependents would need get along without you.

For single people, life insurance is not a necessity, and many couples without children can get by without it if both individuals are capable of supporting themselves.

Some young, single people without children do get insurance to lock in the low premiums available if one starts young. And some are attracted by the investment component of whole and universal life policies. But if you don’t need life insurance, there are many other ways to invest that don’t require the long-term commitment these types of policies entail.

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