Is Paying for Life Insurance Worth It?

Do I really need life insurance?

Let’s be honest: adulting can be tough.

As responsibilities pile up, there’s so much to manage. You might have considered life insurance, but it can feel awkward to think about.

No one likes contemplating their own death, but it’s one of those necessary aspects of adult life.

If you’re thinking about life insurance, it’s essential to explore your options to see if it’s right for you. There are reputable insurance companies, some of which even sponsor events, so you know they’re trustworthy.

But first…

What Does Life Insurance Do?

Life insurance involves getting a policy with an insurance company. In exchange for premium payments, the company provides a lump-sum payment (known as a death benefit) to your beneficiaries when you die.

Life insurance is chosen based on your needs and goals. There are two main types to consider: term and whole life insurance.

Term Life Insurance

Term life insurance provides temporary protection for a specific period, such as 10-30 years. After your term ends, you’ll need to start a new policy. If you die during the term, your beneficiary will receive the policy’s value as a lump-sum payment.

Term life insurance policies can go up to $1 million or more, depending on your needs. It’s important to accurately assess your coverage needs, as underestimating or overestimating can be common. A general rule is to multiply your annual income by 10-15 to determine your policy amount. The more assets you have, the higher your policy should be.

Whole Life Insurance

Whole life insurance is a policy you hold for your entire life. Monthly premiums are higher, but your policy accumulates cash value over time, which you can borrow against tax-free or use for education and retirement funding.

Whole life insurance is ideal for estate planning, as part of your premium builds cash value and pays dividends, growing your funds over the years.

Life Insurance Can Be Affordable

A common misconception is that life insurance is expensive. While whole life insurance can be costly, term life insurance is relatively cheap, with prices depending heavily on your age and health.

For example, at 25, I pay just $15.21 per month for my term policy. According to CNN, a healthy 35-year-old man could expect to pay around $430 per year ($35.83 per month) for a $500,000 term life insurance policy. The same amount of whole life insurance could cost around $4,400 per year ($366.66 per month).

Term life insurance is a budget-friendly option that most people prefer. As you age, premiums for term policies increase, but starting with a shorter term when you’re younger can secure lower rates even into your 30s or 40s, as long as you maintain good health.

When Is Life Insurance Necessary?

Now, let’s answer a big question: When is it necessary to get life insurance? Not everyone needs it; it’s a personal decision. You need to carefully evaluate your situation to see if starting a policy would be beneficial.

Many people consider life insurance when they have kids, wanting to name their children as beneficiaries. While many in their mid-20s might not think about life insurance, being a parent changes that perspective. I want to ensure my son is financially stable if anything happens to me.

If you have kids and want to secure their future for college or living expenses, life insurance is a good option. Others get life insurance when they marry or buy a house. You might also consider it if you have significant debt, as you wouldn’t want to leave your spouse or loved ones with a huge financial burden if you pass away prematurely.

Life insurance can provide funds to replace lost income, allow time for grieving, and cover burial arrangements. It’s essential to have a plan in place to protect those you love.

When Is Life Insurance Not Necessary?

Life insurance may not be necessary if you don’t have dependents or financial burdens that could fall on someone else if you die.

For instance, if you’re a single 26-year-old with no children, renting an apartment, with a stable job, some savings, and little debt, life insurance might not be necessary.

Another scenario is if you have significant assets. If your assets are substantial enough to keep your loved ones financially stable after your death, purchasing life insurance might not make sense.

Where to Get Insured

If you’re considering life insurance, continue your research and act on it. September is National Life Insurance Awareness Month, making it a convenient time to shop for policies and compare options online.

One company to consider is Haven Life, which offers free quotes online for price comparison. Also, check if your employer provides any coverage options.

Doing your homework will help you find the best life insurance policy for your needs.

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