Life Insurance: Do You Really Need It?

Life Insurance: Do You Really Need It?

Do you need life insurance? Unless you have a spouse or kids who rely on your income, chances are no. But even if you don’t have dependents, life insurance can still be beneficial to your personal finances, as it can help provide financial support to others in the event of your death. This article explains why this type of coverage isn’t always necessary and walks you through the process of deciding whether or not you should get it.


Key facts about life insurance

A life insurance policy is basically a contract between you and an insurance company, where you pay a regular premium in exchange for coverage if something bad happens. You can choose how much coverage to get, but it’s a good idea to look at how much debt or income your family would need in order to live comfortably after you die.

What’s covered by term life insurance

When you buy term life insurance, you are covered for a certain period of time (the term) and a certain amount (the face value). If you die within that period, your beneficiaries receive money equal to that face value. Usually, you can’t take out another policy during that period without facing higher premiums or being denied altogether. As with most types of life insurance, permanent and universal policies offer more protection but at a higher cost.

The hidden costs of getting a policy

In addition to your monthly payments, you may be subject to two other significant life insurance fees. Your agent will charge a fee for creating your policy—usually 2% of your face value—and you’ll likely have to pay a mortality and expense fee, which is another 1% of your face value that goes toward costs associated with maintaining your policy. But these two fees alone won’t cost more than $1,000 or so over 20 years. So how much are you really paying for insurance?

Strategies to reduce your premium

Raising your deductible is a good way to reduce your premiums. Larger deductibles usually mean lower monthly payments, which in turn means lower life insurance premiums. (Of course, they also mean that you’ll have to pay more out of pocket if you actually do have to file a claim.) Raising your deductible from $1,000 to $2,500 can drop your premiums by 25 percent or more.

Common myths about term life insurance

Myth #1: I don’t need life insurance. I have a lot of debt, but my family will be fine without me financially. Just because you don’t have a lot of assets doesn’t mean your family will be fine without you. For example, if you are the only one in the household bringing in an income and then die unexpectedly, it's not likely that your family would survive for long unless someone else was able to step in and provide for them. And even if they do get help from another person, they might not be able to provide as much as you were providing. That's why it's important to make sure that the people who rely on you financially are taken care of after you're gone with term life insurance.

Choosing a company and getting the best price

When you buy life insurance, you’re paying to protect yourself in case something bad happens. The point of insurance is that even if a disaster occurs, it won’t destroy your finances. When buying life insurance, getting low premiums is nice—but it shouldn’t be your only concern. You also want to be sure you have high-quality coverage that will help replace your income and provide for your family if something terrible happens.

How long do you need coverage for?

Life insurance might be useful if you’re planning to leave a financial burden on your family after you die—but it may not be a good idea if they won’t need help for many years. If your kids are older, or you don’t have debts or a mortgage, then you might not need life insurance right now. Instead, think about saving for an emergency fund that can cover funeral costs and other burdens when your loved ones aren’t financially prepared to deal with them.

Don’t assume you can’t afford it

Life insurance is affordable for most people. Life insurance can actually be cheaper than you think. In some cases, it may only cost as little as $10 a month. Make sure to get a quote and find out if it’s right for you. Then set up an appointment with your agent to discuss the best type of policy for your needs. 
No one likes the idea of planning for death but when it comes down to it, life insurance might just be one of the smartest things you'll ever do. So how much life insurance should I buy?

Can I get coverage if I have pre-existing conditions?

Unfortunately, some insurers will not insure people with pre-existing conditions. In that case, you’ll have to look into getting supplemental health insurance, which is often more expensive. Most times, though, life insurance is available to those with pre-existing conditions; it might just cost more than usual. Additionally, if you’re a smoker (even if you’ve quit), your rate will likely be higher.

Frequently asked questions

Is life insurance a wise investment for you and your family? Before you apply, heherere are some answers to common questions. - How does life insurance work? 
- What factors affect the cost of coverage? 
- Who is eligible for coverage under group plans offered by employers or other organizations such as unions or professional associations? 
- What is guaranteed renewable term life insurance and how does it differ from other forms of permanent coverage like whole or universal life?

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