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Life Insurance: Is It Worth Getting One?

Life Insurance: Is It Worth Getting One?

November 27, 2019
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If you’re at a point in your life where you’re contemplating whether you should get life insurance, then you probably fall into one of these categories:

  1. You have people in your life who are financially dependent on you.

  2. You have people around you--family, friends, or co-workers--who have been getting life insurance for themselves.

  3. You’ve seen an ad somewhere or a post on Facebook that the sooner you start with life insurance, the better--with a visual of what your X amount of dollars will look like after X amount of years.

  4. You’ve heard of someone who lost a spouse/partner and that person has been vocal about how life insurance has helped them get through financially. 

Asking yourself if it’s worth getting life insurance is a very important first step to having a secure financial future. In fact, asking yourself if what you’re going to purchase is worth your money is one of the wisest spending practices there is. It gives you the chance to see the product more objectively and you give yourself the opportunity to make a better decision.

To be in a better position to decide on whether it is going to be worth getting a life insurance policy, let’s talk about a few common questions. that one might find asking.

Who needs life insurance and why do people purchase life insurance?

You probably already know the basics of insurance if you have auto insurance, a homeowner’s insurance, or professional liability insurance. They all serve as a sort of safety net that protects the insured from financial distress in the event unexpected circumstances lead to expenses that have not been planned for; hence would possibly leave one struggling financially.

In the case of life insurance, the most common notion is that people who choose to get it want to be assured that the people depending on the insured financially are secured and taken care of in the event the insured dies and will no longer be able to provide for his family. This still holds true to the present time. But life insurance policies have also evolved over the years and people who need or want the following are those who typically decide to get life insurance.

  1. Income replacement. Perhaps the more obvious benefit, your life insurance policy will help you ensure that your loved ones are taken care of financially in the event of your passing. If you and your spouse rely heavily on your income for mortgage payments, what happens to your partner and your obligations if you die? If you have an active life insurance policy, your beneficiary will receive the death benefit (also called the face amount) regardless of whether you’ve fully paid for your policy or if you had just bought your policy and your second premium isn’t even due yet. As long as your payments are up-to-date and the policy is in force, you need not worry about your beneficiary getting the claim.
  2. Supplemental income after retirement. As we age, we enter different stages of our lives and our needs change as well. One major change where one might need a source of additional funds is retirement. At one point or another, whether it’s due to age or health reasons, the time to retire will come. The good thing about life insurance is that you don’t necessarily have to die to benefit from it. There are plans where you pay specified amounts (called premiums) for a certain number of years (i.e. for 5 or 10 years) and then have to option to choose whether you want a lump sum amount in the future (i.e. on the 21st year of your policy), or get a fixed amount on a monthly basis which ideally would be around the amount that you earned while still working. In fact, you’re not even limited to the amount you’re earning right now or your current lifestyle. If you want to upgrade your lifestyle--for example, be able to travel at least once a year, then this is something you can plan for. Set your goal and have your financial adviser or insurance agent help you compute how much you should be set aside now to achieve the retirement lifestyle you want.

  3. To be able to ensure a child’s college education. One of every parent’s concerns is to secure their child’s future by providing them with a good education. But are we ever a hundred percent certain that we will be able to afford our kids’ education until they graduate? The tricky part about life is we’re never one hundred percent sure about anything in the future; the best way we can deal with this uncertainty is to have a “plan B” in place. Aside from death, there’s the risk of being diagnosed with a critical illness which can potentially drain your savings due to medical bills. Accidents happen and when one, unfortunately, leaves a young parent permanently disabled, what happens to the kids’ college education?

  4. Paying final expenses. Nobody likes to think about death, but if we are to be prepared, we really do need to give some thought to what will happen in the event of our passing. Expenses don’t stop when we die. In fact, our death might be one of the more expensive events in our life. Have you thought about funeral or burial costs and estate taxes? The more properties you have, for example, the bigger your estate tax will be.

What if I only have $30 extra each month?

Contrary to common misconception, a life insurance policy can be affordable to the average American. Getting a 20-year term life insurance with a death benefit of $500,000 would cost around $29.80. Depending on where you are and several other factors such as age, sex, health status, nature of work (whether or not you are in a high-risk occupation), the premium of a life insurance policy, would vary. Someone living in North Dakota, for example, might be able to get a plan with the same benefits for less. Note that you are not required to be insured for $500,000. If you only require to be insured for $300,000, or if your budget will only allow you to get a policy with a face amount or a death benefit of $250,000, this is something that can be worked out.

How do I know how much life insurance I need?

Basically, what you need to do is make a list of all your expenses, including foreseeable ones, and have your financial adviser or insurance agent do a forecast or estimate how much this amount should be, say, 20 years in the future so that you have the same purchasing power. Aiming for this amount ensures that you will be able to maintain your current lifestyle no matter what.

What if I have properties and their market value will be more than enough to secure our future?

 It is good to have real estate properties, especially for long term investment, as their value will most likely go up over time. This, however, is not a guarantee. At the same time, in the event of an unexpected death or other serious conditions, a real estate property is not a liquid asset and it is not always easy to dispose of. A life insurance policy, on the other hand, will have the funds you’ll need for your loved ones when you need it the most.

What if I’m healthy and believe I can save up for my future?

First, the main purpose of having life insurance is to make sure that you and your family’s future is financially secured regardless of whether you stay healthy or not. At the same time, it ensures you that you will be able to cover your estimated daily living expenses, at the very least, upon retirement or in any event you are diagnosed with a critical illness or become permanently disabled.

Second, your health status is one of the major factors that affect your premium.  Being in good health and relatively young (i.e., 35 years of age or less) work to your advantage when it comes to applying for life insurance. To be more specific, between two people who are in perfect health, someone who is already in his/her 40’s will have a higher premium as compared to someone who is just 30. Don’t wait till you have health conditions which might mean increased rates, or worse, prevent you from even being qualified to get life insurance in the first place.

Now let’s talk about a few life situations and how you might one day say to yourself, “Thank goodness I have life insurance.”

You have a family who depends on you for financial support.

Whether it’s your wife and kids, your siblings, or your parents, what happens to them, what happens to them in the event of your passing?

You have real estate properties, but the person who’s going to inherit these properties in your passing isn’t exactly financially stable.

When someone dies, the person who inherits the properties will have to pay relevant taxes. And when there isn’t enough cash available, you can just imagine the problems this might cause.

You get into a terrible accident that leaves you permanently disabled and unable to work.

With the right coverage, your insurance provider will release the death benefit with no further obligation to pay the remaining premiums.

You and your spouse just bought your first home and you rely solely on your income to pay for the mortgage.

Sometimes, it’s difficult for couples to both work full-time when the kids are still young. Some couples decide that it would be better for one parent to work and one parent to stay home with the kids. Even with a part-time job, your spouse will not be able to cover all the expenses alone. But what happens to your family in the event of an unexpected death?

It’s often difficult to see the value of something intangible, especially when you have to make sacrifices now, but don’t expect to reap the benefits until after one, two, or even three decades. But what if these small sacrifices will mean securing your future? What if these 25 to 50-dollar monthly sacrifices ensure you that even if something bad happens and you’re no longer able to provide for your family, they will be okay financially and you know that you’ve secured your children’s college education?  What if getting life insurance now allows you to sleep better at night knowing that when you retire, you won’t have to depend on anyone else to sustain your lifestyle? Would you not think that it is indeed worth getting one? We know you're ready to take a look into the nitty-gritty details. Just contact us today and we'll get you set up!

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