If you’re young and in good health, you may not have given life insurance much thought. No matter how old you are or what your lifestyle is, life insurance is something to consider. Life insurance is an agreement with your insurance provider to pay your loved ones a death benefit when you die in return for your monthly payments. However, this important financial investment offers so much more.
Continue reading to learn about some of the reasons you should have life insurance.
1. Protect your loved ones’ finances
No matter the circumstances, death leaves friends and family reeling. Your life insurance provides them with financial security so they can tend to their emotional wellbeing without worrying about money. If your family depends on your income to pay rent or utilities, cover childcare, or make ends meet, your life insurance will ensure their financial stability by replacing your income.
Unfortunately, your family may be on the hook for some debts when you pass away. If you have a joint credit card with your spouse, for example, or if a sibling has co-signed any of your loans, they will become responsible for the remainder of that debt. Life insurance provides your family with the resources to avoid paying it out of pocket. You should consider your income, obligations, and your family’s expenses while calculating the life insurance amount that’s right for you.
2. Pay for funeral costs
Without a financial safety net, your friends and family may have to empty their savings or turn to crowd-funding to cover your end-of-life costs. According to the National Funeral Directors Association, the median cost of a funeral in 2021 was $7,848. Life insurance covers that funeral expense instead of adding to your family’s burden.
Individuals without dependents might consider small whole life policies called “funeral insurance.” These policies range from around $5,000 to $25,000 and don’t require a health examination. For younger people, though, funeral insurance policies can actually come at a higher monthly cost than term life insurance, so it’s important to consider your specific circumstances while choosing a life insurance policy.
3. Fund your children’s education
The rising cost of higher education is no secret. Life insurance is one way to safeguard your child’s future, whether you’re near or far. If you pass away, your beneficiaries can apply the death benefit to your children’s tuition. But even if you’re still alive, your life insurance can help cover the costs.
Depending on how old your whole life insurance policy is, it may have enough cash value for you to withdraw some money for tuition. You can also take out a loan from your insurer against the cash value of your life insurance. While the loan will still accrue interest, you or your child can make payments on a timetable that works for you. If you die before repaying the loan, the remaining balance will come out of the death benefit.
4. Cover your long-term care
Half of all adults will require significant help with their day-to-day tasks as they age. While we often associate life insurance with death benefits, it can also help you finance long-term care, so you aren’t left scrambling to cover the costs.
Many insurance providers offer plans that include a substantial long-term care benefit and reduced death benefit. If these policyholders don’t use the entire long-term care amount, the remainder is reallocated to the death benefit. You can also add a long-term care rider to your life insurance policy at the time of initial purchase.
Life insurance can be challenging to discuss and even harder to navigate, but with a bit of research and support, everyone can benefit from finding a plan that suits their needs.