The Importance of Life Insurance
Life insurance is important because your death benefit pays out when you pass away. The money will help pay your family’s living costs while they regain their footing after your passing. Your insurance payout may also repay any outstanding debts you leave behind, like your mortgage or other loans.
Do I Really Need Life Insurance?
Many people benefit from life insurance at some point in their lives, especially if they have dependents or financial obligations. What kind of insurance somebody needs depends on their protection needs and whether they need additional features like cash value accumulation found in some permanent life insurance policies.
Learning what kind of life insurance best suits your needs is a good idea. Fortunately, we’ve got you covered. Check out our articles on term insurance vs whole life insurance and universal vs whole life insurance.
Is Life Insurance Worth It?
Life insurance can be worth it. It can help your family retain their quality of life even when you’re no longer around to provide for them.
This is especially important if you’re the breadwinner of the family. Your death benefit can keep your family well-financed while they get back on their feet.
But life insurance can also be worth it even if you’re not the breadwinner of your family. At the very least, your death benefit can cover your funeral expenses and repay any outstanding debt you may have left. Without insurance, your family may have to sell assets or make sacrifices to pay these costs.
Check our guide on the importance of life insurance to learn more about why you should get insurance.
Is Life Insurance Important if I Don’t Have a Family?
Life insurance can be important even if you don’t have a family. Your beneficiaries don’t have to be related by blood. You can give your death benefit to a close friend or any other loved one who isn’t related to you.
If you can’t think of any person who can receive your death benefits, don’t worry. You can also give your death benefit to an organization. This means you can make one final donation to a charity or cause that you’re passionate about.
What Does Life Insurance Cover?
Most life insurance policies pay a benefit when you pass away, provided the cause of death is not excluded under the policy terms. This means the insurer will provide benefits when you pass away.
However, insurance companies may have exclusions regarding the causes of your death. If you die due to excluded causes, the insurer won’t pay out your death benefits.
Common life insurance coverage exclusions include:
- Dying by suicide (typically within the first two years of the policy)
- Dying while performing illegal activities
- Death related to drug or alcohol use in certain circumstances, depending on policy terms
- Death while participating in high-risk activities (unless disclosed or covered by the policy)
- Death related to acts of war or military service (depending on policy exclusions)
Some of these exclusions aren’t permanent. For instance, the suicide exclusion lasts for only two years from buying the policy.
Reasons to Get Life Insurance
People get life insurance for various reasons. Here are several of the most common reasons you may buy a life insurance policy:
- Protect your dependents: Financially protecting your family is one of the most common reasons for getting life insurance. The death benefit will help your family maintain their financial stability while they recover from your passing.
- Repay outstanding debts: Your life insurance death benefit may provide enough money to ensure your family can repay any debts you left behind, like a mortgage or student loans. This means you won’t leave your loved ones with a large bill they must work extra hard to repay.
- Ensure business continuity: Your life insurance payout can help support business continuity, even in your absence. Your business partner can use your death benefit to cover operating costs in your absence and potentially find a replacement.
- Donate to charity: Many people have causes they’re passionate about. Your death benefit is a great way to make a final donation to your chosen charity or cause.
- Improve your end-of-life arrangements: Some policies include an accelerated death benefit rider that may allow you to access part of the payout if you develop a qualifying serious illness or suffer from a terminal illness. You can use the extra cash to ensure your last months are as comfortable as possible.
- Pay for funeral expenses: Funeral costs aren’t cheap. Fortunately, your death benefit can help your family cover the bill.
- Invest your premium for returns: Permanent and universal life insurance policies have an investment component that builds value as you pay premiums. You can later withdraw or loan against this cash value as an emergency source of funds.
People Who Should Get Life Insurance
Many people should get life insurance because they have loved ones or dependents to protect. Here are several groups of people who benefit the most from life insurance:
Key Advice from MyChoice
- Life insurance isn’t one-size-fits-all. Pick your coverage based on your financial needs, not just your age or where you are in life.
- Even if you don’t have dependents, you might want coverage to handle final expenses or leave a legacy, so you don’t leave costs for others.
- Make sure you know the policy’s exclusions and terms before you buy, so your beneficiaries aren’t caught off guard when making a claim.
- Review your life insurance whenever you go through big life changes, like buying a home, having kids, or starting a business.