Most people agree that car insurance and homeowners insurance are requirements, not luxuries. But when it comes time to increase their financial safety net, they start to question themselves, asking: “Is life insurance worth it?”
A life insurance plan is more than just a “nice to have” addition to your insurance coverage. For most people, it’s essential for providing peace of mind when—not if—the worst happens.
If you’re wondering whether you should buy life insurance, the answer is almost always “Yes!” Here are just a few reasons why you should take the step toward your long-term financial stability.
How Does Life Insurance Work?
Life insurance is a contract between you and an insurance provider, designed to offer financial security for your loved ones when you’re no longer there to provide for them.
In exchange for regular premium payments, life insurance companies agree to pay a death benefit to your beneficiaries upon your passing. This benefit can be used to cover expenses such as funeral costs, outstanding debts, daily living expenses, or even future financial goals, like education funds for children.
There are two main types of life insurance: term life and whole life.
Term life insurance provides coverage for a set period, such as 10, 20, or 30 years, and is typically more affordable. If you pass away within the term, the policy pays the agreed-upon benefit. Whole life insurance, on the other hand, offers lifetime coverage and includes a cash value component that grows over time, making it both a protection plan and a potential investment tool.
Some life insurance policies offer living benefits, allowing you to access a portion of the death benefit during your lifetime if you face certain critical illnesses. Policies with living benefits can provide extra financial support in the event of a serious medical condition, helping you manage costs when you need it most.
Understanding how these options work can help you select the best plan for your family’s needs and financial goals. By choosing life insurance, you’re not only securing financial support for your loved ones but also ensuring that they have a solid foundation to rely on when they need it most.
Is Life Insurance Worth It?
For many, life insurance might seem like an optional add-on, but the reality is that it provides far-reaching benefits that can secure your family’s financial future.
Beyond peace of mind, life insurance offers practical advantages that can help protect your loved ones from financial hardship. Life insurance plays a vital role in long-term financial planning by helping to secure your loved ones’ future and protect against unexpected financial burdens.
Here are five key reasons why life insurance is not just worth it, but essential for long-term stability.
1. Life Insurance Protects Your Family
By its very design, life insurance provides your family with financial reassurance due to your passing. As long as you keep your policy in good standing by paying your life insurance premiums, your beneficiaries will receive a lump sum on your death.
This amount can be used to:
- Pay off your mortgage payments
- Pay off your outstanding debts
- Pay for your children’s tuition
- Cover funeral expenses
- Replace your annual income
- Help pay for living expenses
- Help your spouse find a new career
- Invest as a source of income
- Or any combination of these
Even if you are a stay-at-home spouse, think of the financial toll that your death would bring to the family. Life insurance is not just for certain people; it’s a way to provide financial security to those you love most.
2. Life Insurance Is Affordable
According to a 2020 study, 65% of Americans said they didn’t have life insurance because it was “too expensive.” But the truth is that life insurance is often extremely affordable!
The average premium payments for a 40-year-old purchasing a 20-year $500,000 term life policy are just $26/month. That’s roughly $6,000 over the life of the policy.
When you think about the amount you’re putting into your life insurance policy against the financial protection you’re receiving, the benefits of life insurance are difficult to ignore.
3. Life Insurance Benefits Are Tax-Free
The death benefit your family will receive is completely tax-free, allowing them to use every penny.
For a family wracked with grief and confusion, this can be a financial (and emotional) lifesaver.
4. Life Insurance Can Have Cash Value
Some types of permanent life insurance carry a cash value component, which adds an additional layer of financial security.
Whole and universal life insurance can both come with a cash value component, which grows with every payment you make. Depending on your policy, you may be able to borrow against this cash value or even receive a portion as an annual dividend.
In most cases, you will receive the full cash value if you cancel your life insurance policy (which isn’t the case with term life insurance).
Instead of just buying a policy and blindly paying a premium, you can allow your policy to grow and use that cash for your betterment in the future.
5. Life Insurance Is Customizable
No two families (or insurance policies) are alike; that’s why there are many different types of life insurance.
Talking to an independent insurance agent is the best way to find the policy that’s best for you. They can even layer and compare life insurance policies to build custom coverage that meets all of your needs.
For example, if you’re concerned about medical exams, some policies offer simplified underwriting or no-exam options, though these may come with higher premiums. Some people even take out whole life insurance with a higher premium, overpay into the policy, and borrow against the resulting cash value. Others start out with a straightforward term life policy, then purchase guaranteed life insurance later in love to add to their overall value.
How Much Life Insurance Do I Need?
Determining the right amount of life insurance depends on your unique financial situation and the needs of your loved ones. To arrive at a number that offers adequate support, it’s important to consider several factors.
When selecting a policy, consider the amount of life insurance to cover immediate costs like funeral expenses and any outstanding debts, ensuring your family doesn’t face a financial burden.
Start by looking at your current financial responsibilities—things like mortgage payments, outstanding debts, and daily living expenses. These are the immediate costs your family would need help covering if something happened to you.
Next, think about future financial goals. Do you want to help fund a college education for your children, or ensure your spouse can comfortably retire? Adding these goals into the calculation gives you a more comprehensive view of the coverage your family may need over the long term.
It’s also a good idea to consider any existing savings, investments, or other sources of income that could supplement the life insurance benefit. Balancing these resources with your coverage needs helps you avoid either under-insuring or over-insuring yourself.
For a more accurate estimate, a life insurance calculator can help you factor in your unique financial situation, making it easier to arrive at a realistic coverage amount.
While there’s no one-size-fits-all amount, carefully evaluating these factors will help you make a well-informed decision. Consulting with an insurance professional can also provide valuable insights, guiding you toward a coverage level that aligns with your family’s specific needs and long-term security.
Protect Your Family Today
Life insurance should never be an optional expense. In fact, your long-term financial stability depends on it.
No matter your concerns, goals, or budget, we can connect you with a life insurance policy that provides you and your family with peace of mind. Only after we have discussed your individual needs will we scour the market for life insurance quotes from a variety of carriers.
Don’t let fear of the future keep you from setting up a safety net for those you love most. Contact DSI today for a free quote.