With life insurance ads popping up on TV, the radio, and even your daily scroll through social media, you may be wondering whether or not you need to purchase a policy.
Life insurance is an important purchase, but is it worth fitting into your budget right now?
While young individuals with no dependents or transferable debt may not need coverage at the moment, in most cases, the best time to buy life insurance was yesterday.
If you’re on the fence about locking into a life insurance policy, read on as we unpack the top 10 reasons to apply for coverage today.
10 Reasons You Should Buy Life Insurance (Sooner Than Later)
Here are the most prominent reasons you should purchase life insurance coverage right away:
- Replace Income
- Final Expenses
- Estate Taxes
- College Tuition
- Cash Value
- Business Incentives
- Peace of Mind
1. Replace Lost Income
One of the most compelling reasons people purchase all of the policies above is to replace lost income.
Financial security is vital. It is how we provide food, shelter, clothing, and more for ourselves and our loved ones.
That security may be in jeopardy if the breadwinner in the family dies.
Replacing lost income could provide instrumental support for your spouse and/or children.
Purchasing life insurance can help ensure your loved ones won’t be straddled with monthly bills, mortgage payments, tuition, childcare, or other expenses they may struggle to pay.
Instead, they can continue to maintain their lifestyles while adjusting to a new life.
2. Pay Final Expenses
If a loved one passed away without life insurance, you would have to pay out-of-pocket for the funeral or burial, and all the costs associated with it.
Additional fees might include the cost of cremation, a casket, a headstone, a cemetery plot, a service, transportation, and a myriad of logistical arrangements.
Headstones alone could cost between $1,000 to $5,000, and higher if you live in a large metropolitan area like Chicago or Washington, D.C.
Final expense policies are designed to cover funerals, burials, and other end-of-life costs.
These plans allow you to estimate the costs ahead of time, creating savings with the benefit of cash accumulation.
When the time comes, your loved ones will be prepared to say goodbye without the added stress of excessive financial burdens.
3. Take Care of Debts
The reality is, many individuals and families live paycheck to paycheck due to variable expenses and potentially crippling debts.
One of the most common personal liabilities in the United States is credit card debt.
According to CNBC, 55% of households possess credit card debt with an average balance exceeding $5,000.
That figure can include bills such as utilities, cell phones, personal loans, auto insurance, student loans, and medical debts, among others.
Life insurance can shield your beneficiaries from transferrable debt, providing them with the means to make crucial payments on the debt you leave behind.
To cover your debt, you might consider a term life insurance policy spanning the remaining length of time and amount owed on your loans to protect your spouse.
4. Manage Estate Taxes
An often-overlooked catalyst for purchasing life insurance is paying off estate taxes, applicable if the value of the property and the assets is above $5.45 million.
When someone passes away, their heirs receive their property and have nine months to pay the estate tax.
For example, if an estate is worth $4.5 million and has an additional $1.5 million in added value from the life insurance policy, the total cost would exceed the $5.45 million threshold by $550,000.
The estate tax rate is 40 percent, so in the example above, the beneficiaries would have to pay the IRS a total of $220,000.
Odds are you don’t have that kind of money lying around to give away, but if you do, having life insurance can go a long way towards settling estate tax.
In this case, permanent life insurance could allow one’s heirs guaranteed financial protection down the road.
5. Plan for College
Tuition rates are climbing at a pace that far exceeds the average salary growth, and they don’t appear to be slowing down any time soon.
This chasm makes college a progressively less feasible option for many families, despite the seemingly high value Americans place on higher education.
If you have young children or plan on starting a family, the cost of college alone can be enough of a reason to buy life insurance.
Life insurance can provide your children with the educational and financial foundation you always envisioned, maximizing their chances for a successful career and life.
Americans currently owe $1.56 trillion in student loans with 45 million borrowers, three times higher than the total credit card debt in the United States.
Life insurance will give your children the best odds of avoiding that kind of crippling student loan debt.
6. Build Up Cash Value
Term life insurance provides coverage for a specific period of time, simply granting a death benefit if the policyholder passes away during the length of the policy.
The primary perks of term life insurance are higher coverage and lower costs, but policyholders may want to opt for a policy that gains value over time with permanent life insurance.
Whole or permanent life insurance becomes more valuable over the lifetime of the policyholder, with a portion of each premium going towards insuring their life or the face value.
The rest of that premium goes towards enhancing the cash value of the plan.
If you are short on cash, life insurance is a quick withdrawal away, and you can use money from your permanent policy tax-free.
You can also take out a loan on the policy. People often borrow up to the amount of the cash value total.
If you’re looking for guaranteed protection with rewards during your lifetime, a whole life insurance policy could be worth considering.
7. Business Incentives
Many people think of life insurance as a benefit to their immediate family, but the reasons to buy life insurance do not end there.
A substantial policy is a powerful tool when it comes to insuring yourself against loss as a business professional.
An untimely death can crush the aspirations of a small business. The death of a partner or producer can cut into financial profits and hinder future growth.
Life insurance provides a resource for owners to keep their business afloat while they consider training and replacement options.
The first step is to determine which employees are essential to the overall success of the business. These individuals are the ones you will want to cover first.
From there, consider their total influence on company earnings and how much it would cost to replace them in the event of a fatal incident.
These proactive steps will provide the basis for what is called a key man life insurance policy. If you or your business partner dies, the policy will provide the financial resources to hold on to the company.
8. Flexible Policies
The flexibility of life insurance is one of the biggest incentives for purchasing a policy ASAP.
Maybe you don’t have children to send to college just yet or multi-million-dollar estate taxes to account for.
Even if you’re just looking to cover the cost of a funeral, there’s a policy for you.
With flexible term lengths, riders, and a variety of payment options, you can mold a policy to fit your needs.
While the most popular choice is term life insurance, you can also opt for funeral, burial, whole life, universal, variable, and simplified issue insurance. There are also group life options available.
There’s even flexibility to underwriting, with some companies offering coverage without medical exams.
The only limit to your policy design is your imagination.
Life insurance is affordable on any budget.
Specific policies, term life insurance, in particular, are far more reasonably priced than whole or universal life insurance policies.
And if you’re healthy, you could even find coverage that costs as little as a dollar per day.
Here are some of the most significant factors that influence the cost of a life insurance policy:
- Age: Your age is the primary factor when it comes to determining insurance premiums. Many policies have age eligibility limits. If you want to buy life insurance, it is in your best interest to do so when you are younger.
- Sex: According to the CDC, women in the United States live for 81.1 years on average. Men live for 76.1 years on average. Thus, women tend to pay less for life insurance.
- Lifestyle: The riskiness of your lifestyle has a direct impact on the overall costs of life insurance. Some common concerns for insurers may include smoking, drug use, your driving record, and dangerous hobbies, like skydiving or bungee jumping.
- Health: Underwriters will analyze your health, with conditions like hypertension, high cholesterol, cardiovascular disease, and weight affecting premiums. They’ll also explore your family health history.
The fewer risk factors you present, the better rates and coverage you can access.
10. Peace of Mind
Nobody expects a fatal or catastrophic event to happen.
These occurrences come out of nowhere, making it important to be prepared.
Life insurance gives policyholders the luxury of peace of mind, knowing that if the unexpected happens, their family will be protected.
Whether you opt for a term or permanent life policy, life insurance is a way to ensure stability.
Rather than wonder how your family would fare if you passed away unexpectedly, a life insurance policy gives you the much-needed assurance of your family’s wellbeing.
People purchase life insurance to meet a wide range of needs.
While not everyone needs to purchase life insurance, most adults could benefit from owning a policy.
If you meet the criteria above and find yourself in need of coverage, there’s no better time than today to buy a policy.
Not delaying your decision could save you thousands of dollars in the long run and provide your family with critical protection in their greatest time of need.
Start your search today by determining your family’s life insurance needs and comparing quotes from top providers.