Is Life Insurance a Must-Have?
Life insurance guarantees beneficiaries at least some financial compensation after the death of a loved one such as a spouse or parent. A life insurance policy can provide death benefits in the form of a one-time payment to certain surviving loved ones. It could also help during payment gaps, such as if the breadwinner loses his or her job. The protection life insurance can offer may be appropriate for you depending on the situation. However, a policy can also be expensive – and perhaps not necessary for your unique needs.
What Is the Point of Life Insurance?
Learning why most people purchase life insurance can help you decide whether it is something you need. The point of taking out a life insurance policy is to protect yourself and your relatives financially. Individuals who worry about outliving their insurance policies purchase life insurance to ensure the payment of remaining benefits to beneficiaries. You cannot outlive a life insurance policy. You may, however, outgrow the need for this type of policy.
Life insurance is a wise investment if you have unique needs. Middle-aged couples saving for retirement or paying a mortgage on a house, for example, can purchase life insurance to fulfill their financial needs in tough times. If the higher-earning spouse were to lose his or her job, for example, life insurance would provide a safety net. Couples with children – especially special-needs children – can benefit from the peace of mind life insurance brings. Should the parents die, surviving children would receive financial benefits to help them pay for things such as housing, childcare, special education and medical care.
People that will benefit most from purchasing life insurance are those with potential financial needs in the next 20 to 30 years. Anyone who wishes to have a backup plan for finances should the worst happen may wish to purchase this type of insurance. Business owners, new families, homeowners and people with a lot of college debt could benefit from life insurance. Unused life insurance may go to beneficiaries if the policyholder passes away without using the insurance.
Who Does Not Need Life Insurance?
Life insurance boasts many attractive benefits, but it is not necessarily a must-have. It is not a mandatory type of insurance, like automobile insurance in Arizona. It is an optional type of coverage with no legal penalties for failing to purchase a policy. If you are nervous about paying for things if you lose your job or otherwise take a financial hit, you may want the safety net of life insurance. If certain factors exist in your life, however, it might not be worth the money to purchase life insurance.
- If you are wealthy. If you have enough money to
see your family through hard times, life insurance could be redundant. You will
not need insurance if you can already ensure your family’s financial stability
if you were to pass away, get sick, lose your job, etc.
- If your children are adults. Once your children
are old enough to sustain themselves financially, you and your spouse may no
longer need your life insurance policy. Self-sufficient adults will not need a
lump sum as much as small children should something happen to you.
- If you have a small estate. Estate planning is a good reason to purchase life insurance. If you have a modest estate and will not owe estate taxes, you might not need the help of life insurance. The same is true if your estate is liquid enough to pay off your estate taxes without needing insurance.
In these scenarios, purchasing life insurance may not be a necessity. You and your family could foreseeably sustain yourself based on your financial status without needing a bolster from a life insurance policy. Every case is unique, however. If you think your family will have better peace of mind with life insurance, it may not hurt to take out a policy. Speak to a professional about a life insurance plan for advice on your specific situation.