5 Reasons Why You Should Get Life Insurance
A life insurance policy can protect your family in the event of your death. However, it’s important to know what you’re buying and what you’re paying for, because not all life insurance policies are created equal. Here are five benefits of life insurance that will help you understand this important product better and hopefully lead you to get the most out of your investment in a life insurance policy.
#1: A death benefit payout
This is perhaps life insurance’s most basic benefit. If you die, your beneficiary will receive a payout from your policy. A death benefit can help cover expenses such as funeral costs, outstanding debts and future income that would have been lost. All life insurance policies pay out differently, but keep in mind there is no one-size-fits-all when it comes to death benefits. When deciding on how much life insurance you need, take into account expenses such as education for your children or lifestyle expenses if you are leaving behind a spouse and/or parents who depend on you financially. A good place to start? Figure out what it would cost to replace your gross annual income at work.
#2: Death benefits are tax free
Say you bought a $500,000 life insurance policy that paid out upon your death. Your beneficiary would receive $500,000, but they wouldn’t have to pay taxes on it since they technically didn’t earn or inherit it. If you don’t have life insurance and die without leaving behind an estate plan, then anything you leave behind will be subject to probate laws and taxes, which can be costly for loved ones. So if you have some money to leave behind for loved ones upon your death, get life insurance ASAP.
#3: Life insurance provides financial security
In case something happens to you, your spouse and family will be provided for through life insurance proceeds. #4: Life insurance can protect your assets: If you’re in an accident or diagnosed with a serious illness and are not able to work, life insurance can help pay for vital needs such as housing, food and clothing. #5: Life insurance provides financial peace of mind: According to a 2012 survey by MetLife, 29% of women said that knowing they had life insurance would make them feel at least somewhat more financially secure than they do now. And only 11% said it wouldn’t make a difference—so clearly there’s some value in making sure your family is protected.
#4: Life insurance acts as a retirement tool
It’s never too early to start saving for retirement. Life insurance is essentially an investment where you buy a policy and can choose how to invest your money, including mutual funds and stocks. For example, if you invested $2,000 in life insurance annually at age 30, by age 65 you could have more than $550,000 in savings. That means that your life insurance plan actually works as a retirement tool because it helps your family build a strong foundation for when you’re no longer around. It’s kind of like getting paid to work toward something else!
#5: Life insurance protects your loved ones
Not everyone thinks about life insurance as an insurance, but, of course, it is. The main benefit of life insurance isn't to protect you — it's to protect your family and help them in times of need. For example, when you pass away, life insurance can help cover funeral costs (which aren't cheap). If something were to happen to you, many families would be left with medical debt — not only would they lose a member and a provider but also a safety net. Protecting your family financially goes beyond just savings and investments; it includes helping pay for education or even simple luxuries like entertainment. If something were to happen to you (hopefully nothing will), don't leave behind mountains of debt for your loved ones.