No one wants to think about their own demise, but our time on this Earth is limited. Money is important to live a comfortable life while we’re here, but I’m sure most of us don’t want to leave our loved ones behind with financial burdens. Have you ever thought to yourself why you need life insurance?
Life insurance is an option to help provide your loved ones with a financial sum when you’re no longer around. You may be wondering whether you really need life insurance or not. We’ll go through some key factors that will determine why you most likely should consider getting life insurance. But first, let’s go over how it works.
What is Life Insurance?
Life insurance is a contract between an insurance policyholder and an insurer (insurance company) where the policyholder promises to pay a regular premium while the insurer promises to pay a designated beneficiary a sum of money upon the policy holder’s death.
While many people have life insurance, at least 27% of American adults with life insurance don’t have nearly enough coverage.
There are two main types of life insurance: term and whole.
Whole life insurance is best for estate planning because part of your premium goes toward building cash value and the policy also pays dividends that make that cash grow as the years go by. In order to buy a suitable amount of actual insurance protection if you died, you’d have to pay a much higher premium than with term life.
With term life insurance you choose a term, typically ranging anywhere from a few years to as much as 30 years, and pay a monthly premium based on a few factors like:
- How much coverage you need
- Your age
- Current health status
These plans don’t build cash value and are just in place for the term specified in the contract. Therefore, premiums are much lower which makes it easier to fit into your budget. Once your term is up, you can simply apply for another term life insurance policy.
So why do you really need life insurance? Sure, a lump sum of money for your family in the unfortunate event that you’d pass away prematurely may seem like a reasonable option. But paying life insurance each month does add another bill to your list. Is it worth it? Do you need life insurance if you’re single and don’t have too many liabilities?
Here are 5 likely reasons why life insurance is important.
1. Replace Lost Income
One of the most important reasons why you should life insurance in place is to replace lost income. Imagine what would happen if you suddenly lost your job and all sources of income. Who would this affect? Would your spouse be suddenly burdened with all the bills? Will your kids have to leave private school? Will your home go into foreclosure?
If your income suddenly didn’t exist because life insurance wasn’t around, this would pose a big financial burden for your spouse or other family members who may have to take over the responsibility. Life insurance can help in that your beneficiaries can receive money that will help replace the income you were bringing in.
This is why life insurance is especially important for married couples including stay-at-home parent. Just because stay-at-home moms or dads don’t earn a paycheck from an employer, the contributions they make to the household are priceless and often crucial in order for everyone’s live to run smoothly.
If a stay-at-home mom suddenly passes away, her husband will need to take over her role and may not be able to maintain the same work schedule which could reduce the household income. Life insurance can help supplement some of these financial needs while the family makes the difficult transition.
2. Pay Off Debts
Having debt is one of the reasons why you should have life insurance. Debt is a liability that means signed a contract agreeing to pay a lender a sum that you borrowed. Whether you have student loans, credit card debt, a car loan or a mortgage, you may not be able to discharge some of your debt when you die.
I know this is the case with many private student loans. No one wants to leave their loved ones behind with tons of debt. When considering your life insurance policy amount, consider how much debt you have and how much your beneficiary would need to pay it off and live comfortably.
3. Cover Your Child’s Education
Having kids changes everything. Your sleep. Your weight. Your life insurance needs. It’s no secret that college is expensive. You can add your kids to your life insurance beneficiaries so they can still have some money to pursue higher education no matter what.
Often times, you can have more than one beneficiary and have them split the life insurance payout. By writing a detailed will, you can explain who would get which funds and what the money should go toward.
4. Affordable Way to Protect Your Loved Ones
Life insurance doesn’t have to be expensive. Term life insurance policies are actually pretty affordable and easy to work into your budget. The process can be pretty simple too and you can even get a quick quote online.
If you wondering if you’re getting the best possible rate for life insurance, Bestow can help you find out. Bestow provides free quotes on easy and affordable term life insurance. You can get a free quote for policies starting at as little as $5 per month with coverage ranging from $50,000 – $1,000,000.
5. Peace of Mind
Getting signed up for life insurance may make you feel a sense of achievement, and it should. You’re giving your loved ones some protection financially in the event that you and your income would no longer be around. You can rest-assured knowing that your beneficiaries would have a reasonable sum to help cover debts, looming bills, college and other important costs to help them be comfortable.
The best part is that this peace of mind won’t have to cost an arm and a leg or take up a ton of time. Getting your first policy doesn’t have to be a pain since Bestow doesn’t make you deal with doctors, needles, paperwork or waiting.
Click here to get an instant quote and choose your desired policy amount.
Also, feel free to let us know your thoughts about life insurance and how much you really think you need in the comments below.