Life insurance is a contract that provides an income tax-free death benefit to your beneficiaries, helping them cover expenses and maintain financial stability after your death.
Key takeaways:
- Life insurance provides financial protection for your loved ones after your death, covering immediate expenses and long-term needs.
- For healthy adults under 40, a $500,000 20-year term policy typically costs $24-$37 per month, depending on age and gender.1
- The best time to buy life insurance is while you're young and healthy—waiting until you need it may mean you can no longer qualify.
- Permanent life insurance builds cash value you can access during your lifetime for major expenses like education or retirement.
- Life insurance can also protect your business and allow you to leave a charitable legacy.
Life insurance provides valuable financial protection for the people you would leave behind if you pass away.
Life insurance is not as complicated or expensive as many people may think. So rather than view it as such, consider what it could mean to your loved ones someday if they lost you — and think of it instead as financial security during a difficult situation.
Here are five important reasons why life insurance is important.
1. Life insurance protects your family's financial security
If you think you don't need life insurance, you're right — technically, at least. You don't purchase life insurance for yourself. You purchase it for the loved ones you leave behind.
Here are the ways life insurance can help loved ones in your absence.
Short-term family needs
Upon your death, would your spouse or partner be able to pay the rent? Afford the bills? How about pay for funeral, burial or cremation costs?
At a time of great emotional stress, financial concerns can pile on — especially if they are forced to move, re-enter the workforce or make other significant lifestyle changes.
Would you leave behind significant credit card debt or student loans? If you're young and your parents cosigned on your loans, they may be liable for your debt. If your loan includes an acceleration clause, your parents may have to pay off the loan immediately.
Life insurance can help keep your family members from having to tackle large financial issues when they may be least equipped to do so.
Long-term family needs
Your family can feel the economic impact of your loss well into the future.
Sometimes family members must make major changes that create additional expenses, such as a non-working spouse returning to the workforce and needing to pay for daycare. Life insurance proceeds can help cover those new expenses.
If you have children, life insurance can help provide stability and normalcy in their lives — for example, remaining in their school district, participating in sports, having the ability to go to college or pursue other dreams.
Perhaps your family includes a child, sibling or parent who is disabled and will require lifelong assistance and financial support. Life insurance can help ensure the continuity of their care.
Protection for your business
For business owners, life insurance can help your business keep its lights on, employees paid and vendors satisfied in the event you die unexpectedly.
There are also ways life insurance can benefit business owners during their lifetimes.
2. Life insurance may cost less than most people expect
Let's address this first, because it seems to be a stumbling block for many people.
While the cost of life insurance coverage depends on a lot of variables like age, sex, overall health and type of policy, it typically costs far less than people think.
How much does life insurance cost? For healthy adults under 40, a $500,000 20-year term policy typically costs $24-$37 per month, depending on age and gender. If you're under age 30, it can cost less than $30 per month.1
Naturally, as you age, buying life insurance becomes more expensive because your health declines and the odds of dying sooner increase. So lock your rate in now while you're young and healthy and save yourself from paying a higher premium later.
3. Waiting too long may mean you can't qualify
Not all deaths are unexpected — serious illnesses or accidents can come into play, leaving significant medical bills behind.
Unfortunately, by the time someone is diagnosed with a serious illness, it is often too late to get life insurance coverage. You can help ensure your family is able to stay in their home and not dip into savings to pay medical bills by having life insurance.
4. Permanent life insurance can be an additional source of funds
All life insurance is not the same. While term insurance is just that — a temporary policy that lasts for a specific time period and then ends — permanent life insurance is meant to cover you for the remainder of your life.
