Time and time again, I’ll come across an unfortunate story and/or a GoFundMe for a person who didn’t have life insurance and has left their family with debt, no savings, and very little to continue to live off of.
Note: Before you exit out of this page because you think it’s not worth it, many people can easily find life insurance plans for around $25 a month– so there are extremely affordable plans that exist.
Every time I see one of these stories, I think about how much I wish these families knew about life insurance, from how affordable it could be to much they need it.
Before I go on, I realize that this can be a hard subject to talk about as it’s talking about what happens when you or a loved one dies. But, learning why you need life insurance is a very important thing, and it can help your family out when they need it the most.
According to Life Insurance Awareness Month (from September 2017), around half of the people in the U.S. do not have life insurance. And, those who do have life insurance typically have much less coverage than they need, at an average of just $168,000.
Many people just accept whatever life insurance benefit their employer provides, which is usually a low amount, if any. But, if you really want to get the most out of life insurance and help your family, you will need more coverage than just what your employer provides.
So, what is life insurance?
Life insurance is basically money for your family if you pass away. And, if you are the sole or primary earner in your family, then there are a lot of people who rely on you financially. It is money that can be used to pay for funeral expenses, the day-to-day bills, pay off debt, etc.
Think about it like this: If you were to die tomorrow, how would your family be able to cover the bills?
That is the biggest reason for why you need life insurance.
The main reason most people get life insurance is because it can help your loved ones and anyone who depends on you. This way they can still pay the bills and grieve without having to worry about money. There are many more reasons to get life insurance though!
If you are looking for life insurance, I recommend checking out Fabric. Fabric is an online life insurance company and they sell affordable life insurance. It’s easy to apply as well!
How much is life insurance?
Many people skip life insurance because they think it’ll be too expensive. However, that’s far from the truth! Typically, for around just $50 per month, you can find a policy that offers $1,000,000 coverage. Many people can easily find life insurance plans for around $25 a month too– so there are plans for nearly everyone.
They has a life insurance calculator that will help you see how much it will cost for different amounts of coverage. I used it to see what $1,000,000 of coverage would look like and it’s super affordable.
Their life insurance calculator takes the guesswork out of figuring out how much coverage you need too, and you should never guess at your life insurance coverage! Your recommended coverage amount will be determined by your age, number and age of dependents, debts, income, and savings. After that you can start looking at rates from different top-rated life insurance companies.
$25 a month is probably less than your internet bill. And, there are probably many things you could cut out of your budget to make life insurance feel even more affordable than it already is.
Now, that $25 a month cost is for term life insurance, but there is more than just that when it comes to life insurance.
The two main types of life insurance that people get are Term Life Insurance and Whole Life Insurance.
Term Life Insurance is something that covers you for a set number of years, and it is typically the least expensive option. You can use a term life insurance policy to carry you through your working years while your retirement fund grows. Once you reach retirement age, you should have enough aside to cover you in case of an emergency. Most young families will be best off with term life insurance too.
Your term life insurance policy only pays out upon death, so there are no other financial benefits to it after that. Honestly, that’s all that most people need life insurance for anyway.
Whole Life Insurance is a policy that covers you for your entire life, and because of that, it is much more expensive. It also may have a cash value, investment options, etc. Those are all reasons why it is much more expensive than term life insurance. There are many reasons to choose one type of policy over another, but a whole life insurance policy might be a better option if you have a dependent who will need life long care.
When does a person need life insurance?
Okay, not everyone needs life insurance. However, most people do.
If you are single, are debt free, and no one depends on you, then you probably don’t need life insurance.
But, life insurance can still help your family out if you are single. If you have debt and have co-signers on your debt, then you should absolutely have life insurance. This is because if something were to happen to you, you don’t want your co-signer (it could be your parents, siblings, etc.) to be stuck paying your debt because you didn’t think of a plan.
I once read a true story about a young adult who did not have life insurance. They passed away suddenly and left their student loan debt behind to their parents, who were her co-signers. They were left with monthly payments on her student loans of nearly $2,000 a month. This is such a horrible story for so many reasons.
Now, if someone does depend on you, such as a spouse, elderly parents, or children, then you definitely want life insurance. You want your loved ones to be taken care of if something were to happen to you, correct?
I’ve heard that life insurance is a waste of money.
Unfortunately, there are some people who will tell you that life insurance is a waste of money, but often this is completely untrue.
For the average family, even some higher income earners, it is difficult to put enough money aside to cover such a catastrophic event like losing a loved one. If you are paying off your debt, saving for retirement, etc., then it could be quite difficult to save up the $1,000,000+ that a life insurance policy could offer you.
Now, you can invest money for your future, but it would take years for your investments to reach that amount of money. With a life insurance policy you would have access to that money as soon as you signed up for your policy.
4 Reasons Why You Need Life Insurance:
1. Do you have a family?
If you have a spouse and/or children who depend on you and your income, then you should have life insurance.
Life insurance can help your family so that they can continue to pay their normal day-to-day bills and any debt that you may leave behind.
Now, some debt may die with you, such as medical bills, but credit card debt, loans, even some student loans (like private ones) will be passed on to your spouse and/or children.
In addition to covering any bills or debt that you may leave behind, a life insurance policy may even help them pay off the mortgage, pay for their college education, and more.
Just think about it. What would your family do without your income? Would they be limited?
2. Has anyone cosigned a loan for you?
If you had someone cosign a loan for you in order to be approved, then this is absolutely why you need life insurance. This includes car loans, student loan debt, a mortgage, and so on.
Too many people forget about this when they think they don’t really need life insurance. Then, when they pass away, the co-signer on their loan, often a loved one, is left with the debt to pay.
I’m sure you don’t want to do this to anyone. By having life insurance, you will guarantee that your cosigner will not be stuck paying your debt.
It’s honestly just the responsible thing to do.
3. Are you young and healthy?
If you are young, then you may be able to qualify for a cheaper life insurance plan. I know many young and healthy people who skip life insurance because they feel they are invincible. But, because you are young and healthy now, you are more likely to find a less expensive life insurance policy that still offers you the coverage you need.
If you sign up when you are younger, you may be able to lock in a cheaper plan and give yourself peace of mind for years to come. If you do plan on having children one day, or are still deciding whether or not you want to start a family, getting life insurance when you are young and healthy is one of the best decisions you can make for their future.
This is a big reason for why we are thinking about getting life insurance now even though we don’t have children.
4. Do you know how much a funeral is?
The average funeral is $7,000 to $10,000. If something were to suddenly happen to you, who would have to pay for your funeral expenses?
Life insurance can actually help your loved ones pay for your funeral. Without life insurance, your loved ones may end up paying thousands of dollars out of pocket for your funeral expenses.
I know no one likes to think about that, but it’s all about being responsible and caring for your loved ones even if something has happened to you.
Do you have life insurance? Why or why not? If you do, how much do you spend each year on it?