Many people recognize the need to buy life insurance to protect assets and provide for loved ones during a difficult time. In fact, according to a 2021 LIMRA study, 59% of people who don’t have life insurance say that they need it, and the COVID-19 pandemic has made people more aware of how precious life is. Yet, despite over half of people acknowledging they should have a life insurance policy, many Americans are still hesitant to make the purchase. If you’re on the fence about making life insurance part of your financial plan, here are 8 reasons to buy life insurance.
1. Replace income
The proceeds from your life insurance policy can replace lost income if you pass away unexpectedly, which means your family can be financially secure during a stressful and challenging time. In a 2021 LIMRA study, 42% of Americans admitted they would face financial strain within 6 months if a primary wage-earner were to pass unexpectedly.
However, it’s also important to consider that replacing contributions from a spouse who works in the home would create financial strain. For this reason, both you and your partner may need life insurance, regardless of employment status. And while your income may be a factor in determining how much life insurance you can get, it is still possible to get coverage even if you’re not currently getting a paycheck.
2. Pay off debt
Whether you leave behind credit card bills, medical bills, or a mortgage, loved ones can use the money from life insurance to pay off debts. Since life insurance benefits are typically tax-free, your loved ones can use the money without restriction for any remaining financial burdens.
3. Cover end-of-life expenses
Funeral and end-of-life expenses are costly, and 43% of millennials, most under age 40, are concerned about burdening others with their final expenses or leaving dependents in a bad financial situation. Yet, 51% of LIMRA’s 2021 survey respondents don’t own life insurance because they don’t like thinking about death. Although conversations about dying may be uncomfortable, planning for the future by purchasing life insurance can help build financial security for your family and provide peace of mind.
Your life insurance benefit can cover burial, cremation, funeral, and other end-of-life expenses, helping your loved ones find closure. A specific type of life insurance policy, final expense life insurance, is designed to help older adults cover funeral expenses and other end-of-life costs. In addition, a final expense policy can be used to cover doctor bills, debts, and other immediate expenses after your death or even leave an inheritance for your family.
4. Pay for a child’s education
As a parent, you want to give your child everything they need to thrive, and for many families, that means a great education. New parents often find their financial priorities shifting and want to start saving for their child’s future right away. Life insurance can offer even more financial security for your child, with ways to designate money just for education. To ensure funds are used for college, you might want to consider naming a trust as your life insurance beneficiary and specify that the life insurance money will pay for your children’s education.
5. Leave a legacy
Life insurance is a great way to pass on a financial legacy to loved ones. However, did you know your life insurance beneficiary doesn’t have to be a person? A charity or organization can also receive all or part of your life insurance benefits.
So, if an organization or nonprofit has been important to you over the years, naming them as a beneficiary lets you support them even after you pass away. For example, if there’s a shelter where you love to walk dogs, a school where you tutor in the afternoons, or another organization that’s special to you, reach out to them for their details to add them as a beneficiary.
6. Plan for business continuity
If you’re a business owner, you probably have business continuity plans to protect your organization from weather events and security incidents. Yet do you also have a plan for keeping the business running if something happens to you?
Whether you run a small or large business, you want to ensure the continued success of your legacy, keep things running, and provide your employees with consistency and security during a transition. Buying a life insurance policy can help your business partner pay off debt, provide your employees with stability, or allow your grieving spouse to buy out of the business.
In fact, many business owners take out more than one life insurance policy to provide for the company’s needs and their loved ones’. For example, you may choose to have an individual term life insurance policy to support your family’s financial needs and take out a key person life insurance policy for your business. With key person life insurance, the business, rather than a person, is the beneficiary, so the cash infusion from the policy can help your business continue to run smoothly during an unanticipated and difficult period.
7. Use living benefits
Many people mistakenly believe life insurance benefits only kick in after you pass away, but did you know you can use some life insurance benefits while you’re alive? Insurance companies offer riders, or optional coverage benefits, which you can add to your policy to tailor to your needs. You can add many riders at little or no cost, and they expand coverage or increase the death benefit payout if you meet certain conditions.
One common rider is a terminal illness rider, often called an accelerated death benefit rider. This allows you early access to your benefits if you’re diagnosed with a terminal illness, providing flexibility to pay for end-of-life care, medical expenses, travel, or anything else you need.
In addition to riders, other types of life insurance have flexible living benefits. For example, whole life insurance, a type of permanent life insurance, offers lifelong coverage with a cash value that accumulates over time. When you purchase whole life insurance, part of your premium goes toward securing the death benefit, and the rest goes toward building your policy’s cash value. As a result, your cash value account increases with every payment and earns interest, similar to a savings account. Then, you can withdraw from or borrow against this cash value or even receive dividends to use later in life.
8. Peace of mind
Finding the right life insurance policy lets you rest easy, knowing that business, home, education, and other expenses will be covered if something happens to you. This peace of mind allows you and your loved ones to enjoy your time together.
We want to help you prepare for the future and find the right life insurance policy for you. It all starts with getting a quote. Or, if you prefer, you can talk to a licensed insurance agent over the phone at (844) 432-7065, who can help you review life insurance options and find the right policy to meet your budget and needs.
