A good financial plan is like a jigsaw puzzle with different pieces addressing specific needs. Saving, paying off debts, growing your wealth, protection — all working together to maintain your financial health. You might be hard at work on the first three things on that list. But have you given thought to the protection part, which includes buying life insurance?
I bought a term life insurance policy when I got married in my early thirties. The coverage gave me tremendous relief to know I had a financial backup plan for my partner and our shared bills. And now that I’m a single parent, it’s even more important to know that my kids have a financial safety net if something were to happen to me.
If you haven’t gotten life insurance yet, you might just need a little nudge to complete that task on your to-do list. It’s an important one. Here, seven reasons why life insurance is a smart move.
1. It’s a financial safety net for your loved ones
You love your spouse, your kids, your parents. The last thing you want is for them to be left in a lurch financially if something were to happen to you.
The primary reason for purchasing life insurance is to help your loved ones shoulder the financial burden of your death. The proceeds from your policy can go towards burial expenses and everyday bills or bigger things like a mortgage or your kids’ education when the time comes.
2. You don’t want to leave debt behind
Ideally, you’re working hard to pay down your debt, but life doesn’t always follow our plans. If you were to die suddenly, you wouldn’t want your family to be left with the burden of credit cards, car loans, student loans or a mortgage. If you purchase enough coverage, a life insurance policy could help clear the deck so those bills aren’t hanging over your partner or loved one’s heads.
This is an especially important consideration if your parents cosigned on your private student loans or other liabilities. Being left with those debts could put a strain on their finances at a point in life when they might be readying for retirement.
3. You own a business
Speaking from experience, being your own boss is great. I work solo but you might have a business partner or run the business with your family’s help. Life insurance can help protect the investment of time and money you’ve made in the business.
Even if you’re a freelancer like me, you could still benefit from having life insurance. Your loved ones could use the proceeds of your policy to help pay outstanding loans or credit card debt owed by the business.
4. It’s your legacy
If you’re in your 20s, 30s, or 40s, you might not be thinking about the legacy you want to leave behind. But, it’s never too soon to consider it. Ask yourself what you want to leave behind for your kids. Maybe you want to leave something to charity as well. A life insurance policy can help fulfill those future wishes you have.
Life insurance can also be a tax-efficient way to pass on assets to your loved ones. Generally, payouts for term life insurance policies aren’t subject to federal income tax, which makes it useful in estate planning. And, your beneficiary won’t have to wait for your life insurance to go through probate with the rest of your estate.
5. It’s affordable
The most common roadblock to getting life insurance can be the assumed cost of premiums. Getting covered, however, can be pretty affordable.
Here are a few examples of monthly premiums for a term life insurance policy. The cost of coverage varies based on factors like age, gender, health, term length and coverage amount. These premiums are for non-smokers in excellent health.
| Age | Coverage Amount | Term Length | Premium | |
|---|---|---|---|---|
| Female | 25 | $500,000 | 20-year term | $16.95 |
| Female | 30 | $500,000 | 30-year term | $30.23 |
| Male | 35 | $300,000 | 20-year term | $15.92 |
| Male | 40 | $500,000 | 20-year term | $30.59 |
You’ll get the best rates the younger and healthier you are but don’t let age or health put you off. Even if you’re in your 30s, 40s or even 50s already, life insurance can still be a sound — and budget-friendly — purchase.
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6. Buying life insurance is easy
I put off buying life insurance for the longest time because I knew it was going to be time-consuming to fill out paperwork, go through medical underwriting and wait a few weeks for my final rate and coverage to start. Fortunately, now, it’s simple to buy a term life insurance policy. With startups like Haven Life, which is backed and wholly owned by leading life insurer MassMutual, the process has become much simpler. Through Haven Life’s process, you can easily apply online and find out instantly if you’re approved for coverage. In some cases, no medical exam will be needed to finalize coverage. [Keep in mind that issuance of the policy or payment of benefits may depend upon the answers to health questions given in the application and their truthfulness.]
It’s a modern way to buy life insurance that leaves you with no excuses for putting it off.
7. The peace of mind is worth it
We all want reassurance that we’re doing the right things with our finances and protecting our families. That’s what life insurance can give you. Life insurance can give you peace of mind in knowing that if the worst were to happen, you’ve helped to financially protect the people who are most important to you. In the meantime, you can live life and enjoy your family which is what matters most.
There’s really no reason to go without life insurance if it’s something you need. As you work on your family’s financial plan, remember to pencil in time to consider what kind of life insurance would be best, for you – what you need the policy to cover and how much coverage is enough. This is time well spent, protecting your family’s financial future.
Rebecca Lake is a freelance writer specializing in personal finance and small business. She lives on the North Carolina coast with her two children.
Haven Life Insurance Agency does not provide tax or legal advice, and this information is not written or intended as such. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.
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