5 Reasons You Need Life Insurance
Do you need life insurance? Here are 5 reasons you probably do
How often do you purchase something and hope you never have to use it? Life insurance is one of those things.
While never fun to think about, unexpected death is something that a financially secure person prepares for. The short answer is that if anyone would be financially impacted by your death, you need life insurance.
If you don’t have any dependents, a spouse, and you don’t have any debt that would transfer to someone else, you’re probably okay to focus on other financial priorities. But if you’re not in that boat, here are five reasons that mean you need life insurance:
1. You have children
Life insurance is the best way to financially protect your family. An adequate life insurance policy could be invested to set up a trust, meaning that your family could continue to live off of an income equal to yours even when you’re no longer able to provide it.
You can also use a life insurance policy as a way to leave an inheritance for your children, even if you don’t have any other assets to pass to your heirs. Just add them as beneficiaries to your policy.
2. You’re married
Oftentimes, couples depend on each other for financial and household support. Without your income, would your spouse be able to keep up with all of your current financial obligations? If the answer is no, a life insurance policy is worth investing in to help your spouse maintain the same lifestyle they were living before your death.
3. You have debt
Depending on what types of debt you have, it may not be forgiven upon death. If you obtained a loan with a co-signer, your death would cause your debt to transfer to whoever helped you qualify. Naming your co-signers as beneficiaries in a life insurance policy that covers your debts will protect your friends, family or loved ones from paying the remaining balances on your loans.
4. Your loved ones would be financially burdened by funeral arrangements
The average cost of funeral arrangements is over $10,000–a cost that most families aren’t prepared to cover. If your estate won’t cover your funeral costs, life insurance policy benefits can be used to pay final expenses, including funeral or cremation costs, medical bills not covered by health insurance, estate administration fees and other unpaid obligation.
5. You own a business
Life insurance can be structured to fund a buy-sell agreement, which, in the case of an owner passing away, would ensure that co-owners have the option to buy the deceased owner’s stake at a previously agreed upon price. Essentially, this allows for the remaining owners to get the business and the deceased’s family to receive compensation.
In the case of a business partnership, owners can purchase insurance on each other’s lives. In the case of a business partner’s death, this allows the living partner to have enough money to buy the deceased partner’s interest and pay their share of the company’s obligations without having to resort to drastic actions.
Most people need life insurance
If you’ve read the categories above, you can probably see why most people need life insurance. Basically, the only exclusion from needing a life insurance policy is when you’re a young adult with no spouse, debt or dependents.
With that being said–a lot of people still don’t have it. According to a report published by Best Life Rates, nearly 9 out of 10 Americans agree that most people need life insurance, but only 59% of people actually carry a policy.
How much life insurance do you need?
Getting life insurance can feel like a headache–there’s a lot of questions relating to insurance coverage that you were probably never taught in school. After all, how do you figure out the amount of coverage you need and how the cost fits into your budget?
Luckily, purchasing life insurance coverage doesn’t have to be a herculean task. To put it simply: you need an amount of life insurance that will cover the difference between the amount of money your family will need to continue their quality of life and the amount of assets your family currently has. If you have children, you might also want to factor in college expenses. Bankrate has a good life insurance calculator that will help you ballpark the right policy amount for you.
WizeFi can help you figure out how much you can afford for health and insurance, and then you can break it into how much you can use for each type of insurance. That way, you’ll know you’re purchasing a policy at a price that fits into your strategic wealth-building plan.
What prevents you from life insurance coverage?
While it’s true that some people avoid life insurance simply because they don’t want to deal with it, some people have health conditions that can make a life insurance policy prohibitively expensive.
Heart conditions, stroke, diabetes, osteoarthritis, and obesity are all health conditions that could cause life insurance premiums to rise by as much as 50%. This is because poorer health increases the likelihood of making a claim, meaning the insurance company is assuming more risk.
Once a person is terminally ill, or is diagnosed with an extremely high-risk health event like cancer, it’s typically impossible to secure a life insurance policy.
That’s why it’s important to get covered, and get covered soon: as health declines, coverage gets more expensive and harder to find.
The bottom line
Life insurance means peace of mind. While the idea of leaving your family behind can be unsettling, knowing your family will be financially secure will ease the fear of an untimely death. To get started, talk to your insurance professional today, or use WizeFi’s Connect with a Pro tool to find one in your state.