Is purchasing a life insurance policy really worth it? For most adults, the answer is yes. No one wants to think about the possibility of needing life insurance. But unfortunately, and tragedies can happen at any age. It is important to speak with your family about what life would look like with you no longer in the picture. It is not a fun conversation to have, but it is extremely important to protect your families financial future.
When you have children or anyone who depends on you to get by, life insurance is a no brainer. Leaving them without the means to get by could be devastating to their quality of life. Dealing with the grief from your loss is already painful, making everyday life difficult. Dealing with financial struggles can disrupt their lives even further. Your loved ones may end up needing to relocate and/or find new transportation to school or work without the help of life insurance.
Is Life Insurance Worth it if I Don’t Have Dependents?
Life insurance plans can be customized to suit your specific needs. If you don’t have dependents, you can purchase a cheaper plan that reflects your individual needs. There are a variety of reasons that purchasing a life insurance plan is a good idea even without dependents.
- You want to get a cheap rate while you are young and healthy
- You do not want your friends and family paying out of pocket for a funeral
- You are at risk of developing a health issue
- You are planning on starting a family and want to get an affordable rate before you do
- You have shared mortgages, businesses, or similar properties
- You want to earn cash value on your policy
- You want to leave extra money to loved ones, or a charity of your choice
What Does Life Insurance Cover?
The benefits included in your life insurance policy depends on the type of policy you purchase. The vast majority of people buy term life policies, because they provide the most coverage at the lowest price points. The amount of time, money, and coverage included in term life insurance plans are custom-made. For example, your death benefit can reflect the amount of money your family will need to get by without you. Or you may add accelerated death benefits in the event of illness, disability, etc.
To get coverage for your specific needs at a reasonable price, it is important to speak with an independent insurance agent about coverage options. There is a large variety of policies offered by many different companies. Understanding the differences between them can be confusing without the help of an expert. A knowledgeable insurance advisor will help you choose the right policy for you.
Typical Term Life Insurance Benefits:
- Funeral/Cremation Costs: In 2021, the median cost of a funeral with a viewing and burial was about $7,848 or $6,971 for a funeral with cremation. Those costs have been steadily increasing due to inflation, and will likely continue to rise.
- Death Benefit: The death benefit is the money that goes to your chosen beneficiaries. Your chosen beneficiaries can be anyone you want such as friends, family members or a charity of your choice. You can also chose multiple beneficiaries, and the percentage that each will receive. This benefit is particularly important for anyone who has people who depend on them.
- Unpaid Obligations/Debts: If you have any unpaid debts such as mortgage loans or tax debt, your loved ones may end up being responsible for repaying them. Loans taken out on property, such as a home, will be transferred to whom ever inherits the property. If you are married and file your tax returns jointly, your spouse will be responsible for tax debt from unpaid taxes. If they do not pay, the IRS can involuntarily take that money from your spouse. If they do not have the money, they could be stripped of their assets.
- Estate Settlement Costs: When inheriting an estate, inherits must pay estate settlement costs before they can inherit it. This includes estate taxes, accounting fees, legal fees, and the closing costs associated with transferring the property. The estate settlement costs are typically 3-6% of the estates market value. If your inherent cannot afford these costs, they may not be able to inherit the property.
- Medical Bills not Covered by Health Insurance: Unpaid medical debt is often paid through assets within the estate, such as a car, piano, or the estate itself. The debt must be repaid before your heirs can inherit any of your assets.
How Much Does my Employer’s Group Life Insurance Plan Cover?
How much your employer’s group life insurance plan covers may vary by company. Most group life insurance plans are term policies that cover only a death benefit of about one or two times your annual salary. Usually, none of the other life insurance benefits that are listed above are included. For most people, this is not enough coverage.
Reasons you should purchase a separate life insurance policy include:
- Group life insurance is typically low coverage
- You cannot always take your policy with you when you leave or retire
- You cannot customize the coverage or death benefit amount to fit your unique needs
- You want a universal, whole life, or final expense policy rather than a term policy
- Upon retirement it can be hard to find coverage
- Renewing a policy is easier than starting from scratch later in life, especially if you develop a health condition
Buying a secondary life insurance policy to supplement an employer’s group plan is very common. Policies are much cheaper while you are young and healthy. Once you get older or develop a health issue, finding coverage can become harder. It is usually easier and cheaper to renew your life insurance policy rather than needing to buy a new one. For most people, buying a secondary life insurance plan is definitely worth it to provide peace of mind that you and your family will be protected.
If you are unsure how much life insurance coverage you need, click here to use a free life insurance calculator.
Life Insurance is Inexpensive
One of the reasons that many people are reluctant to buy life insurance is that they don’t want to spend money on something they do not think they will need. Therefore, some people view it as an unnecessary expense. Although we hope to never need it, life is full of unexpected events. It is always better to be 5 years too early, than 5 minutes too late.
In addition, the younger and healthier you are when you purchase a policy, the cheaper it is. Once you buy a policy, you are locked in at that rate regardless of age, or sudden health issues. For young and healthy people, policies can start as low as $18 per month. Compared to the varying subscriptions we purchase such as Netflix, Amazon, etc., protecting your families financial future is cheap!
The average American spends a lot more money on insignificant items than they do on their life insurance policies.
Every month, the average American spends:
- $92 on coffee
- $300 on eating out
- $243 on entertainment costs such as cable and Netflix
Skipping one or two trips to McDonald’s could be all it takes to protect your families financial future. Having the means to protect your loved ones financial future even after we’re gone is a blessing that we should not overlook. Don’t leave them with your debt, future expenses, and without enough funds to pay the bills.
Cash Value Life Insurance Policies
Some types of life insurance policies earn cash value that may be used as a living benefit. Part of your premiums will go toward the cash value component that increases in value over time, similar to a savings account. Life insurance policies with a cash value component are usually only included only in universal or whole policies. They are never offered as part of term life insurance plans. There are different types of universal and whole life policies, and the cash value component varies depending on which you choose.
- Whole Life Insurance
- Guaranteed Issue Life Insurance
- Guaranteed Universal Life Insurance
- Indexed Universal Life Insurance
- Variable Universal Life Insurance
The downside to cash value life insurance policies is that they are more expensive than term life policies, and can take some time to earn value. Be sure to speak with a trusted independent insurance agent to decide if this type of life insurance policy will be worth it for you.
How Can I Make Sure I Choose the Right Policy?
Speaking with a trusted insurance advisor is essential. It is best to see an independent insurance agent/advisor (rather than a captive agent) to get the greatest coverage options at the lowest price. Independent insurance agents represent multiple carriers to ensure their clients get the best coverage for their unique needs. Captive agents on the other hand only represent one company and will only recommend that companies policies, even if you could get a better deal somewhere else.
TDA Insurance & Financial Agency of Michigan
TDA Insurance is a family-owned, independent insurance agency located in the heart of Walled Lake, Michigan. Our motto is to treat our employees like family, so that they treat our clients like family. We take pride in protecting individuals and families across the state of Michigan, and getting our clients the best rates and coverage options in the insurance industry. At TDA, we will make sure you only buy a life insurance plan if it will be worth it for you and your family.