Who needs to buy life insurance?
You’d think most young adults don’t think about buying life insurance, but the truth is 60% of the American population already has an insurance policy.
Three out of five Americans (60 percent) report owning some sort of life insurance (individual and/or group), and more than a third of Americans (34 percent) said they are at least somewhat likely to purchase life insurance in the next year. (source)
Buying life insurance usually makes us think about death.
Although not the most pleasant of topics, unexpected events happen whether we like it or not.
But does everyone really need to be prepared? When is the right time to buy life insurance?
Taking certain precautions, ‘just in case’, can be beneficial.
On the other hand, often times many agree to sign a policy because the insurance agent comes with so many convincing arguments, you just can’t say no to!
This is probably one of the reasons life policies are sometimes mistaken for a scam. Rest assure though, a serious company won’t make it their mission to scam you out of your money.
Many believe life insurance is just another expenditure they probably can’t afford. Certain situations though require you to step up and buy an insurance policy. You know, just in case!
Who needs to buy life insurance?
The one who brings home the bacon
If you’re the only breadwinner of your household, it’s best to make sure your family will be taken care of, if anything should happen.
This about it this way: you’re the only one bringing home an income. Your wife and children depend on you. Now imagine something unpredictable happens and your family suddenly loses the only source of money they had.
How will they pay rent? What will they eat? How will they afford daycare or doctor’s visits?
Not a pleasant scenario to think about, but an insurance policy could provide enough monetary compensation for your family to go on, even in your absence.
Mortgage paying homeowners
Although not mandatory, many homeowners with a mortgage to pay consider life insurance policies as extra protection.
If you’re single and have no one to leave your new house to, then you can probably skip paying for a policy.
However, if you think your family would have a hard time paying the rest of the house if something happened to you, they you could probably benefit from an insurance policy.
Related article: How to pay off your mortgage faster?
Similar to the sole breadwinner’s case, once you become a parent, you become responsible for your children’s well being.
Having a life insurance policy in place might be a good idea, especially if you care for a child with special needs or if one of the parents is a stay at home mom or dad.
Having children, with or without special needs, can be difficult enough to handle financially as is. Taking into consideration the possibility you won’t be around one day should make you ponder.
Same goes for couples who decide one parent should stay at home.
If something unimaginable should happen, you’ll have to find a way to ‘replace’ the many benefits a stay at home parent offers for free: babysitting, picking up the kids from school, etc.
Although not applicable in all cases, some business owners should probably think about buying life insurance.
First of all, if you applied for a big loan to finance your business, that money has to be paid off one way or the other.
Should something happen to your partner, you’d be responsible to pay the debt all by yourself. That can’t be something anyone wants.
One interesting financial lesson I learned from my dad implies business partnerships.
When he formed an LLC with his partner, they’ve also discussed the unpleasant possibility of what might happen in case… something happened.
Naturally, children would inherit half the business shares.
So what’s the problem, you might ask. The next thing to do is to just sell half the company to the remaining partner.
Said partner would need money to afford buying it though. Cashing in a life insurance policy would guarantee there’s enough ‘dough’ for the remaining partner to buy the company from its heirs and continue business as usual.
Related article: A small home based business or a bigger company?
Debt in your name alone generally has nothing to do with your family having to pay it off.
Co-signing a loan, on the other hand, is tricky business if something unspeakable happens.
If you wanted to help a loved one out and co-signed for a credit card, a student loan or any other loan for that matter, they will become responsible to pay it off all by themselves, if you were to pass away.
Aside from the big hole you’d leave in their hearts, you’d leave an even greater hole in their budgets!
Large estate owners
If you can afford a large estate, you can probably afford life insurance as well.
Taxes, administrative fees and other expenses need to be taken care somehow by your heirs.
If they have a good financial situation and can afford it, good for them!
If not, maybe having a life insurance policy in place would help them out.
Otherwise, your heirs might need to sell the property you worked so hard for your entire life. Wouldn’t that be a shame?
Related article: Turn investing in AirBnb properties into a money making opportunity
Whoever wants to leave an inheritance
Speaking of heirs, not everyone chooses to leave property or other assets to the next generation.
In some cases, people can’t even afford to leave behind something of great financial significance.
In this scenario, life insurance could possibly come in handy.
If you want to leave cash as inheritance for your loved ones, you could consider buying life insurance ahead of time.
People who have maxed out their retirement accounts
Certain types of life insurance have a cash value component.
This means, you can actually treat life insurance as an investment, if you managed to max out your 401(k), IRA and other retirement saving plans.
Life insurance isn’t exactly your regular investment strategy, but in some cases it can be a good alternative to top off your retirement nest egg.
Related article: Is it smart to invest in life insurance?
Someone who wants their funeral costs covered
Just like in life, last thing to talk about is funeral arrangements.
A life insurance policy could help pay for your final expenses.
Traditional funerals can get quite expensive and, even though you won’t be here to face the financial facts, your family will have to find a way to fork out the cash.
Having a policy in place won’t bring you back, but could help your family out a great deal. Especially since such tragic events happen without warning.
Insurance isn’t mandatory, but it can provide financial coverage in case of an unexpected event.
Buying life insurance can turn out to be a smart investment. It comes with pros and cons, just like any other big financial decision, so before signing any policies, make sure you really need it and do your research to see which policy best fits your needs.