The Forgotten New Year's Resolution: Life Insurance

We’re not even through January and our great intentions for 2015 have likely already begun to waver. If that doesn’t apply to you, that is amazing, and you should be proud. But, let’s go back to 2014, when we were all excitedly planning our resolutions in the first place. Whether we wanted to get in better shape, cook more often, try for a raise at work or spend more time on creative pursuits, we were probably ignoring a crucial aspect of our financial well-being: life insurance.

What It Is

First things first: What is life insurance, again? It’s a form of financial protection that guarantees payment to beneficiaries when the policyholder dies. It is one of the best ways to protect your dependents financially. Knowing that you are prepared for any eventuality can provide peace of mind for you and your loved ones.

Why You Might Need It

If you still aren’t convinced, here are some reasons you should consider buying a life insurance policy. If your dependents rely solely on your income, life without it can get very difficult very quickly. Adequate coverage will promise you they won’t be left scrambling when the monthly bills start coming in after your passing. It can also help cover any necessary funeral, remains and estate tax expenses you don’t want your loved ones to be burdened with. It can also help your heirs address any loose financial strings you may have also left behind. However, if you have no dependents or others who rely on your income, you may not need it.

Life insurance can also be used as an investment tool that helps diversify your portfolio. Universal coverage is tied to a specific product and policyholders receive dividend payments based on its performance. Certain policies also allow you to build cash value over time.

Lastly, coverage can be very affordable, particularly if you are relatively young and healthy. Adding this to your budget can make a small impact now while potentially making a big difference later on.

How Much You Need

Once you consider the basics about your age, health, income and dependents, you can calculate how much life insurance you need. There is no one answer for everyone. When you are shopping around for your options, it can be easy to get lost. One of the most important questions is whether you should buy a permanent or term policy. A permanent policy stays in place for the duration of your life, while a term policy is in effect for a specific time period that stipulates the insurance company must deliver a payment if the insured person dies within the term — usually five, 10 or 20 years. There is a big price difference, with term life insurance generally being much cheaper. There are also different subsets of these two options available — so study up on important life insurance terms so you are making an informed decision.

So, no matter what it says on the calendar, set a new resolution for yourself, find the right life insurance policy for you, and relax knowing you’ve made a smart decision not just for yourself, but those you may leave behind.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.