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Benefits of life insurance

Not sure if life insurance is worth the investment? Here are 9 reasons to take out a policy.

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As we age and our family, health and finances change, our need for life insurance changes. Life insurance is there as a financial safety net if you die unexpectedly. The right policy can cover debt like credit cards, mortgage and education, and it can take care of others who financially depend on you. But it’s not right for everyone. Consider these benefits to decide if a life insurance policy is a good idea.

9 benefits of buying life insurance today

  1. You’ll have the peace of mind knowing that your loved ones will have a financial safety net when you’re gone.
  2. Life insurance will pay out a lump-sum benefit to help your family to cover short- and long-term expenses.
  3. Payouts are generally tax free, so your beneficiaries won’t need to cough up extra money.
  4. Some companies offer multi-policy discounts for taking out a joint policy with your spouse, or bundling life insurance with other types of coverage.
  5. Depending on your policy, you might be able to adjust your premiums to suit your financial situation.
  6. Some brands let you increase or decrease the benefit of the policy in the future.
  7. There are types of life insurance that have a cash value. A portion of the paid premium is set aside and either accumulates interest or is invested in the market. You can borrow from that cash value, or surrender your policy and collect the cash if you no longer need life insurance.
  8. Most policies provide an advance benefit, without a waiting period, to help cover immediate costs following death.
  9. As you get older and become more of a risk in the eyes of your insurer, you may not qualify for a life insurance policy — or you’ll be charged a higher rate.

Benefits of term life insurance

Term life insurance can help ease any financial burdens by paying a lump sum to your beneficiaries when you pass.

  • Your beneficiaries receive a payout to help with finances after your death.
  • The money can help stabilize your family’s finances and be used to pay off a mortgage, education expenses or unpaid debt.
  • It’s the most affordable type of life insurance, with average premiums less than $50 a month.
  • Policy terms are straightforward and easy to understand.
  • You pay for temporary coverage only for the years you need it the most.
  • If you can no longer afford your premiums, you’ll only lose the premiums you paid, and not any added cash value.

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Benefits of whole life insurance

Whole life insurance is as much an investment vehicle as it is life insurance. Eventually, the investment component of your policy could build enough cash value to pay your premiums, secure a loan, or increase your death benefit.

  • You get a policy that covers you for life and investment product rolled into one.
  • Your payments build cash value over time, which eventually allows you to access that cash.
  • Your loved ones get a guaranteed death benefit after your death.
  • You can set level premiums, which means pay the same amount in coverage every time.

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Benefits of universal life insurance

Universal life insurance is more flexible than whole life insurance, with both a cash value and adjustable premiums.

  • You get lifelong coverage and build cash value.
  • You can change the amount and frequency of your premium payments.
  • You can adjust your death benefit if you can’t afford higher premiums.
  • Once you’ve built up enough cash value, you can begin ton borrow against your policy.
  • It’s a high-risk investment, but it also has the highest potential returns.

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Compare life insurance

Name Product Issue age Minimum Coverage Maximum Coverage Term Lengths Medical Exam Required
Sproutt
18 - 60 years old
$50,000
$10,000,000
5, 10, 15, 20, 25 and 30 years
No
This life insurance broker combines technology and the human touch to match you with a policy tailored to your needs.
Bestow
21 - 54 years old
$50,000
$1,000,000
10 or 20 years
No
Affordable 10- and 20-year term life insurance policies with instant quotes and no medical exams.
Policygenius
18 - 85 years old
$50,000
$10,000,000
10, 15, 20, 25, 30 years
Depends on provider and policy
Compare affordable quotes from 12+ A-rated life insurance companies side-by-side.
Everyday Life
20 - 75 years old
$100,000
$10,000,000
10, 15, 20, 25 or 30 years
No
Build a customized laddering strategy to target specific financial responsibilities and save on term life.
Fabric
25 - 60 years old
$100,000
$5,000,000
10, 15, or 20 years
Depends on policy
Get affordable term life insurance with accelerated underwriting or no-exam coverage up to $1,000,000. Available in all states except CA, NY and MT.
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Are there any benefits to adding riders to my policy?

Maybe — riders are there to help you customize your coverage to suit your needs and bridge any gaps. Some of the most common riders include:

  • Term conversion. If you think you might want to upgrade your term policy to a permanent policy online, this rider allows you to do that before a specific deadline. Otherwise, you’re “stuck” with the coverage you have.
  • Disability income rider. Pays a monthly benefit if you become disabled and can no longer work. If you rely on your paycheck to survive, it may be worth adding this rider to your policy to protect your income.
  • Accelerated death benefit. Pays out a portion of your death benefit if you’re diagnosed with a terminal illness. You can use the money for whatever you wish, but many policyholders choose to use it to cover their medical bills and end-of-life expenses to alleviate the burden on their loved ones.
  • Long-term care. Allows you to access part of the death benefit to cover long-term care expenses, such as a nursing home or private nurse. If you don’t have sufficient savings or want to avoid leaning on your family to pay for those potential costs, consider adding it to your policy.

Is life insurance for me?

Anyone can benefit from having life insurance, but it’s especially helpful if:

  • You have kids. If you’re caring for kids, consider the cost of getting them through the school years, and possibly through college. Your life insurance payout can cover living expenses, tuition and all the other expenses that comes with growing up.
  • You have debts. If you have debt, it won’t go away when you die. Your family will be responsible for any debt you leave behind. Consider carrying life insurance that covers all your debt to lift that burden from your family.
  • You take care of others. If you’re the breadwinner in your household, loss of your income could be devastating. A large life insurance policy can ensure that your loved ones are taken care of if you die or become disabled.

Below is a sample of the types of insurance best for the different stages in life:

AgeLife eventsFinancial obligationsTypes of insurance to consider
18–25
  • Starting full-time work
  • Moving out of parent’s home
  • Starting to accumulate wealth
  • Everyday living expenses
  • Small personal debt
  • Term life
  • Disability
25–35
  • Increase in income
  • Purchase home
  • Increase in short-term debt
  • Marriage
  • Children
  • Short term debts
  • Spouse and children
  • Everyday living expenses
  • Mortgage
 

  • Term life
  • Whole life
  • Disability
  • Critical illness
35–45
  • Increase in earnings
  • Reduction of debts
  • Outstanding mortgage and personal debt
  • Investments
  • Everyday living expenses
  • Retirement fund
 

  • Term life
  • Whole life
  • Disability
  • Critical illness
45–55
  • Maximum earnings
  • Preparing for retirement
  • Less financial commitments as children move out
  • Outstanding mortgage and personal debt
  • Investments
  • Everyday living expenses
  • Retirement fund
 

  • Term life
  • Whole life
  • Disability
  • Critical illness
55 and older
  • Protecting wealth accumulated
  • Retire from full-time work
  • Finance lifestyle with savings
  • Everyday living expenses
  • Any outstanding debts
  • Medical costs
  • Funeral Costs
  • Term life
  • Funeral
  • Critical illness

How can I find affordable insurance?

The cost of life insurance varies from person to person. What you’ll pay depends on factors like your age, health, occupation and even your gender. However, there are some things your can do to lower your cost

  • Don’t buy the first policy offered. Shop around to compare plans by reading reviews and seeing what policies are out there. Once you choose a provider, always read the terms and conditions to make sure you’re getting what you need.
  • Get an idea of how much coverage you actually need. Think about the people who are financially dependent on you and how much money they need to live without you and your income.
  • Quit smoking. Smokers can pay significantly more for life insurance. Not smoking for at least 12 months can lead to lower premiums.
  • Keep yourself fit and healthy. The less risk you pose to the insurance company, the less you’ll have to pay. I
  • Buy a policy while you’re still young. Age is as important to an insurance company as your health and lifestyle. The longer you put off buying life insurance, the more you’ll have to pay.
  • Joint policies: Why not include your partner or spouse on your term life insurance policy? Not only will the both of you be covered, but you’ll also be eligible for discounts on your premiums.

See how little life insurance can cost per week

Bottom line

Life insurance is designed to replace your income and offer your loved ones a sense of financial security when you’re gone. While that is its main purpose, you can benefit from your life insurance policy while you’re still alive. Depending on your coverage, this could involve accessing the cash value to pay for major expenses, or getting your payout in advance to cover medical bills.

If you’re ready to buy a policy, compare life insurance companies to ensure you’re getting the best possible policy and premium.

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