Insurance of any type is about protecting yourself financially from the unpredictable. You don’t know when you’ll be in a car accident, when a fire could damage your home, or when a disease or injury will strike, so you purchase auto, home and medical insurance to protect yourself and others.
Unfortunately, you can’t predict when you’ll pass away either. That’s where life insurance comes in. Most people understand the primary purpose of life insurance is to provide a “death benefit” to their loved ones after they’re gone. And while that is certainly true, they may not always understand the “why” behind this important kind of coverage, and the other benefits life insurance can provide.
The fact is, life insurance benefits can provide valuable financial protection at whatever stage of life you’re in. And whether you purchase it yourself or through your employer, the protection it offers can provide peace of mind for yourself and your loved ones. Here are some key reasons to consider life insurance coverage at any age.
Young adults
When you’re young and healthy, life insurance may not be a top-of-mind purchase—especially if you’re single or married without kids. So why would you need a policy that pays a death benefit if you died unexpectedly? Here are a few scenarios:
- Pay off debts: If your parents, spouse, partner or other family members cosigned or are joint accountholders on your student loans, car loan, credit cards or other debts, they could be responsible for them if you pass away. Your life insurance payout could help them pay these off and ease their financial load.
- Pay for your own send-off: The National Funeral Directors Association estimates the average cost of a funeral with viewing and burial is $8,300.1 If you died unexpectedly, why burden your loved ones with this unexpected cost? Your life insurance beneficiaries could use your payout for a ceremony and burial.
- Lock in insurability and lower costs: You don’t know what the future holds for your health, and if it changes, you may no longer qualify for insurance protection, or it could be more expensive. Plus, life insurance premiums are generally cheaper the earlier you buy it. You’re never going to be younger than you are today!
Married and/or raising kids
As you get older and begin balancing life, careers and kids, life insurance can play a growing role in ensuring that your family is protected if you were gone, and it can provide access to funds you may need for life’s expenses. Consider these possibilities:
- Replacing your income: If you have kids and/or a partner or spouse who relies on your income—fully or in part—life insurance proceeds could help cover child care, tuition, your mortgage and other essential expenses if something happened to you.
- Replacing the work you do at home: Life insurance matters for stay-at-home parents, too! Without you, your family may need to pay for child care, house cleaning, pet sitting and all of the other things you do to keep your household in order. Life insurance proceeds could help pay for these services and more.
- Funding important needs: Some permanent life insurance policies accumulate cash value over time that you can access on a tax-free basis via withdrawals or loans. This could help you pay for college tuition, fund a down payment on a home or provide support during other cash-flow emergencies. Loans are generally at low or 0% interest rates.
Pre-retirement and retirement
How long will your retirement savings last? What if you become chronically ill? As you age, you might face extra—often unexpected—expenses that can rapidly erode your retirement savings. And of course, you may start thinking about the legacy you leave to your loved ones. Here’s how life insurance can help:
- Supplementing your retirement: Will your savings and Social Security provide enough income to live the lifestyle you want in retirement? Cash value life insurance can provide tax-free supplemental retirement income through policy distributions, so you can be ready for planned and unplanned expenses.
- Paying medical bills: Many life insurance policies offer included or optional “living benefit” riders that provide access to funds and other services if you’re diagnosed with a specified disease such as cancer or another chronic or terminal illness.2 The funds can help cover medical bills, home care or other expenses so you can focus on what matters most.
- Leaving a legacy: In addition to these options, life insurance’s primary purpose remains the same: providing for others after you’re gone. Your policy’s death benefit can provide a lasting financial gift to your children or other loved ones, or even a favorite charity, that’s generally free of federal income tax.
Talk to a professional
The best way to learn about life insurance is to talk to a financial professional. They can help determine what kind of policy is right for you, how much coverage you need, and how much you can expect to pay. You can also ask your employer about group insurance coverage that might be offered at work. It may be cheaper than you think, and the peace of mind you and your loved ones receive may be worth the cost.
Additional reading:
Living benefits: Life insurance benefits you can use today
Term vs. perm: Which life insurance is right for me?
Buying early: Lock in lower life insurance rates at a younger age
