Not sure if life insurance is worth the investment? Here are 9 reasons to take out a policy.
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.
When thinking about the kind of coverage you might need, consider your debts and assets, lifestyle and dependents.
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9 benefits to buying life insurance today:
- You’ll have ultimate peace of mind that when you pass your family and loved ones will have a financial safety net.
- Life insurance will pay a lump-sum benefit to help with financial gaps left behind.
- Payouts are generally tax free.
- Some companies offer multi-policy discounts for taking out a joint policy with your spouse.
- Coverage can generally be bundled with other types of life insurance.
- Some brands let you increase or decrease the benefit of the policy in the future.
- 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 keep it as an end-of-life payout.
- Most policies provide an advance benefit, without a waiting period, to help cover immediate costs following death.
- As you get older and become more of a risk to the insurer, you may not qualify for a life insurance policy or will pay more.
Types of life insurance
Among the many life insurance plans and package, there are four popular styles of coverage to categorize insurance policies: term life, critical illness, disability and funeral. Each can be purchased as a standalone policy or added on as a rider.
The most basic form of life insurance covers you if you die. This type of policy can help ease any financial burdens by paying a lump sum to your beneficiaries when you pass. With death comes a lifestyle change and a payout from life insurance can ease the financial stress. Payout benefits can be used for anything your loved ones need including to pay a mortgage, education or unpaid debt.
Critical illness insurance
Critical illness insurance was first conceptualized in South Africa by a doctor named Dr. Marius Barnard. Involved in the world’s first heart transplant, Dr. Barnard was confronted by the fact that although he can save a person’s life, he cannot save them financially.
This type of policy falls under the category of living insurance. It doesn’t wait for you to die before it pays you a benefit, it provides you with a payout while you still have a quality of life. Life insurance providers typically make a lump sum payment if you suffer from or have been diagnosed with a life-threatening illness, like cancer, stroke or heart disease.
Disability is a type of insurance that pays out a steady stream of income paid monthly. The payment could be up to 75% of your gross monthly income, although it may be different depending on the insurance provider. It covers you when you become disabled and are unable to work because of an illness or injury.
Leading insurance providers have increased their maximum benefits giving their clients more coverage. They have even included an optional benefit which allows you to take advantage of their rehabilitation program, which can help the policy holder get back on track.
This rehabilitation program pays a maximum amount of up to 50% of your gross monthly income if you are eligible. The rehabilitation program includes all the resources and training you can get to help you get back to the work force smoothly. This means covering the costs for approved rehabilitation programs, vocational training, special equipment and workplace modifications to ensure a smooth transition.
Funeral coverage is for those older than 50 who want to provide their loved ones money to cover their burial expenses. Typical funeral insurance cover is between $5,000 and $15,000, making it one of the most affordable insurance products on the market. You won’t have to worry about a medical exam to apply. To receive the payout, your beneficiary processes your claim to be able to pay for your funeral.
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:
|Age||Life events||Financial obligations||Types of insurance to consider|
55 and older
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.