Is Life Insurance Worth it? A Guide with Answers

Most people require life insurance coverage. But knowing how much and what type of life insurance you need isn’t always easy to determine. How do you know if life insurance is worth it? Life insurance is a way to protect your dependents financially when you pass away. Having a life insurance policy guarantees a specific payment that can help pay for your family’s living expenses, debts, unpaid medical bills, and funeral costs. However, knowing which is the best life insurance for your needs can be challenging. 

The best way to know if you need life insurance or not is to ask yourself: if I died today, what would be the financial impact on the ones I love most? 

If you are the primary earner at home, the financial impact of a loss of income can be devastating. Concerns and worry about the future may only add to the distress that your loved ones are going through. 

This guide to life insurance aims to answer many of the questions you may have about providing some financial security for your dependents. You will also find out if life insurance is really worth it for you.

 

What is Life Insurance?

Life insurance is an affordable way to provide for your loved one in case you die. Life insurance promises to pay money to beneficiaries of your policy if something tragic happens to you. 

Depending on the type of life insurance, this could be a lump sum, regular income, or could even payout in the event of a critical illness. Certain benefits can also be included in the life insurance agreement that provides for funeral expenses or payment of debts. 

Who Needs Life Insurance? 

Unless you are financially independent, are free from debt, and have already raised your children, chances are you need life insurance. 

Life insurance is worth it if your family is dependent on your income. The money from a life insurance policy can provide financial stability if something unexpected happens. 

Even just having to pay for a funeral can create a financial burden or put a family into debt. According to the National Funeral Directors Association, the average cost of a funeral can be as much as $8,500. 

For example, imagine the situation your family would find itself if your income suddenly stopped. Your spouse would have to continue paying the mortgage, pay off any unpaid debts, fund the kids’ college fees, and pay for funeral costs. The reason for having a life insurance policy is that it will help or completely cover all of those expenses. 

Even if you don’t have any dependents, it is still worth having some type of life insurance coverage. If you passed away, someone would have to cover the cost of a funeral. Even if you have savings and no dependents, funeral insurance can prevent friends or family from having to pay these costs. 

Other Situations Where Life Insurance Is Worth it

It is clear that homeowners with mortgages and a family living at home benefit from life insurance coverage. Buying a life insurance policy ensures your debts are cleared if you die, and they don’t get passed on to your spouse, partner, or children. 

Who else can benefit from life insurance? If you fit into any of the following categories, then it is worthwhile thinking about taking out a life insurance policy.

  • Couples without children

In this situation, having life insurance leaves your spouse or partner in a better financial position in the event of your death. 

  • You are starting a family

Life insurance policies are cheaper than when you get older. Buying a plan when starting a family can give you peace of mind for the future. 

  • Young single adults

The reason to buy life insurance is to pay for your funeral costs. Also, there is less risk of having problems with passing the insurance medical exam when you are younger. 

Types of Life Insurance

There are two main types of life insurance – term life insurance and permanent life insurance. 

Term life insurance

Term life insurance gives you cover for a fixed term and pays a lump sum to the beneficiaries in the event of death. As long as you continue paying your premiums, you are covered. However, at the end of the term, you don’t get any premiums back if you are still alive. 

There are many variations of term life insurance policies, so it is good to see which ones work best for you. Some term insurance policies refund some of your premiums if you don’t die during the term. Others have decreasing or increasing premiums, depending on what you intend to cover.  

Whole life (permanent) insurance

Whole life insurance is a type of permanent insurance policy. This kind of life insurance is more than just an insurance policy that pays out in the event of your passing – it’s like a combination of a death benefit and a savings strategy. 

Part of your monthly premium goes towards the death benefit, which gives beneficiaries a payout if you die. The other part of the premium gets put into an investment savings account. You will then be able to withdraw part of the policy’s cash value. 

Whole life insurance and other permanent insurance policies are complex products. Therefore, you should always get sound financial advice before taking out these types of life insurance policies. 

Whole vs. Term Life Insurance

Both whole life insurance and term life insurance have their advantages and disadvantages. Which one is best for you? The answer depends on your financial income and family situation. 

Is Life Insurance Worth the Cost?

The relatively low cost of life insurance means that it is an investment worth thinking about. It is worthwhile checking out online quotes for life insurance premiums. You may be surprised at how affordable life insurance is. For a small monthly payment, you could safeguard your family from financial woes. 

Even for peace of mind, it is worth considering buying a life insurance policy.

How to Choose the Best Life Insurance Companies

Before buying a life insurance policy, it is essential to know what type of cover is best for your family’s needs. For example, do you need a term or whole life insurance policy? 

The internet is also a great resource to learn about life insurance basics and find out more about different types of policies. 

You can also speak with your employer to see if they have any employee benefits packages. In many cases, these work-related insurance schemes have cheaper premiums. It is often more convenient and easier to arrange life insurance through your employer. 

If you are thinking about arranging life insurance through your employer, make sure that the policy is large enough for your dependents. 

Of course, you may still have questions about the best types of life insurance. Check out our article next week on term vs. whole life so you can make an informed decision.