3 Reasons You Absolutely Need Life Insurance
It’s easy to put off getting life insurance, but it could also put you in an incredibly dangerous position (often, without you even realizing it).
Whether you’re single or married, have several children or no children, young or middle aged... here are three important reasons you absolutely need life insurance.
Before we continue, it’s important we say this first and foremost: We are not ones to use slimy sales tactics or make sensationalized claims. Franky, those things are huge turn offs for us and don’t align with our core values which are rooted in trust and honesty.
Instead, our goal with this post is to educate you on the risks you might not even realize are present, so you can take the necessary steps to protect yourself and your family (in the best way YOU see fit). And if by the end of this article you want an expert to help you, we’d love to be your guide. If not, we’re thrilled you took the time to read this so you can be more informed.
Reason #1: Funerals are expensive.
When we sit down to talk with individuals about life insurance, many people have little idea how much a funeral costs and are shocked when they hear the answer.
The average funeral costs between $7,000-$12,000. This includes transporting remains to a funeral home, basic service fees, a casket, embalming, viewing, burial and other preparation. The average cost of a funeral with cremation is $6,000-$7,000. Caskets and urns alone can cost thousands of dollars depending on the style and materials.
Today, it’s not uncommon for the average funeral to cost up to $9,000 or more.
We bring this up because funeral expenses are often an afterthought when it comes to deciding whether or not to purchase life insurance, and it shouldn’t be.
A simple question to ask yourself is, “If I died tomorrow, can my family come up with $9,000 on a whim to pay for my funeral?” And even if the answer is yes, the second question you need to ask yourself is, “Would coming up with that investment cause immense strain on my family or put them in a compromising position?”
Dealing with the death of a loved one is incredibly painful. Dealing with the death of a loved one and not having enough money to give them a proper service is unimaginably painful.
While life insurance can pay for far more than just your funeral, it’s also one of the more important things it can easily cover.
Reason #2: Life insurance can help you pay off debt, supplement income, and buy your family time to grieve.
One of the most common questions we receive about life insurance is, “How much coverage do I need?”
For us, a good rule of thumb is 10X your yearly income. For example, if you make $60,000 per year, then you need at least $600,000 in life insurance.
While this may sound like a lot, keep in mind the many things your death benefit needs to cover:
Funeral expenses.
Paying off your mortgage or outstanding debts.
Supplementing the loss of your income.
Investing in your child’s future education.
And more.
Let’s run the math to see how quickly that adds up:
Death Benefit: $600,000
(-) $9,000 – to pay for funeral expenses.
(-) $5,700 – to pay off credit card debt. *based on average amount of credit card debt per household in the U.S.
(-) $33,000 – to pay off student loan debt. *based on average amount of university debt per household in the U.S.
(-) $245,000 – to pay off mortgage. *based on average amount of mortage balance of gen X homeowners.
(-) $101,500 – to set aside for 1 child’s college tuition. *based on average cost of $25,396 per academic year for in-state tuition (we rounded to keep the math easier).
(-) $60,000 – to supplement loss of income for 1-year.
TOTAL Leftover: $145,800
Life insurance is a great way to cover these tangibles, but its value also extends to the intangibles.
Whether you feel like $145,800 is a lot of money or not, the undeniably important thing this money can do is offer your family adequate time to grieve your death without being weighed down by financial burden.
Many times, we see people experience the unexpected death of a loved one and they’re forced to go to work on Monday because they don’t have another choice.
Life insurance is one of the ways you get to love and care for your family even when you’re not physically present to do so. Being able to afford them time to grieve and not worry about how they’ll pay the mortgage is invaluable.
Reason #3: Life insurance can be a great tool to build long-term wealth.
Aside from investing in your family’s income stability, life insurance – particularly through a whole life insurance policy – can also be a great investment tool.
The investment component of a whole life insurance policy is known as the policy’s cash value. This cash value grows slowly in a tax-deferred account (meaning you won’t pay taxes on its gains while they’re accumulating).
In many cases, policy holders will use this as a way to build long-term wealth and put money toward their retirement. These policies can even be structured in way to build more cash value quicker and provide a source of non-taxed income.
However, like other long-term investments, whole life policies take time to build cash value. In most cases, this takes 12 to 15 years.
While it certainly doesn’t replace some of the other important investment tools in your portfolio, it can offer you the ability to diversify and continue to make smart choices to set your family up for future success.
Life insurance policies can be a low cost for a very high reward. And while the true benefits of having it extend well beyond what we had time to include in this post, we hope this opened your eyes to key role life insurance plays if the unthinkable happens.
Want to learn more? Check out some of our other posts about this subject:
Ready to explore your options?
There’s a lot to consider when determining what type of life insurance you need and how much coverage is right for you. We’ll work with you to understand your goals and unique needs and match you with the coverages that will allow you to care for your family in the best way possible (something those cutesy lizards and gals with price guns are less interested in).
Give us a call to schedule your review, today!
