Life insurance can often be confusing. Many people know what it is, but they aren't really sure why they may need a policy. This can lead to people putting off getting a policy or, worse, not getting one at all.
If you want to help ensure your family is going to have income and better be able to pay off debts after you’re gone, then life insurance may be very important. Here's why it matters.
Provide for lost income
One of the primary reasons people get life insurance is to help ensure their loved ones won't face financial hardships if they pass away unexpectedly. If you're married and have kids, this can matter a lot, especially if you're the primary breadwinner. Without your income, your family might not be able to afford your mortgage or cover tuition costs. Your life insurance death benefit can help pay for these.
Also, keep in mind, if you are a stay-at-home parent, the value you provide through your work with your kids and at home is important. If you were to pass away, your spouse would have to pay for the services you provide taking care of your family.
Life insurance is important even if you don't have a spouse or children. If you have a partner you share finances with, for example, they might not have the funds to cover the bills that you normally split.
Help cover bills and debts
The same is true for paying for bills and other types of debt.
If you pass away with credit card debt or a car loan, for example, then that debt doesn't disappear — someone will have to pay for it. In many cases, that could be your spouse or partner, and, if you are single, your parents or siblings. Having life insurance can help cover these payments so the costs aren't left to your loved ones.
Your life insurance policy can also help pay for your funeral service and burial. This can help alleviate the burden your loved ones might face trying to pay for it.
When a loved one passes away, it's always an emotional and stressful time. This already difficult period can be more challenging if there are concerns about replacing income and covering bills.
While your life insurance policy can't solve every problem, it can provide a bit of a buffer for your family to get back on their feet. Knowing they have your death benefit to cover the mortgage, for example, can give your spouse the time they need to move forward at their own pace.
Some common myths and excuses around life insurance
There are a lot of reasons why people think they don't need life insurance. Here are some of the most common myths and excuses — and why they may not add up.
- I have life insurance through my employer — A lot of jobs offer a group life insurance policy that's usually one or two times your salary. While that's a good start, in many cases, it won't be enough for your loved ones to replace your income over the long term. Plus, if you leave your job, that policy often won't travel with you.
- It's too expensive — There are a lot of different types of life insurance policies, making it possible for virtually anyone to find something in their budget. If you're young and healthy, policies tend to have a very affordable monthly premium.
- I don't know anything about life insurance — Life insurance can sometimes feel like a confusing topic. Sitting with a financial professional or life insurance agent can be really helpful. They can walk you through the policies that best fit your needs and help you figure out how much coverage you should have.
- I can put that money into my savings — Life insurance shouldn't be something that you look at as part of your retirement plan. Rather, it's there to help your loved ones after you pass.
- I don't have the time — You can complete most of the paperwork for many life insurance policies online from the comfort of your living room. If you need to get an exam, these typically only take about 30 minutes.
- I'm single so I don't need insurance - A common misconception is that a single person without children doesn't really need to buy life insurance. There are many ways as a single person that you could use life insurance to take care of financial obligations that might potentially burden those you love should you die unexpectedly, such as outstanding debts or funeral expenses.
Life insurance is there to help take some of the financial burden off your loved ones when you pass. It doesn't take long to find a life insurance policy that will meet your needs and help your family when they need it most.