Why you need life insurance: the benefits and importance

Learn why it is vital for every household to have adequate life insurance.

Nowadays it is illegal for you to drive around without car insurance. Why? If you get into a wreck and injure yourself or others or destroy property, there needs to be a means of compensation. Most people wouldn’t even get into a car if they were not properly protected. Depending on your driving record, the insurer you select, the type of car you drive and your age, car insurance can cost anywhere from $50 to easily over $300. Yet the same people who will make sure they have adequate coverage for their car, will not make sure they, themselves, are adequately covered with life insurance. We live in a country where over 40% of adults have no life insurance and, of those who do, a large percentage do not have adequate coverage. What is so important about life insurance?

Ask yourself these questions. Do you care about your family? Do you do your best to make sure they are always provided for? Then why should that change if you die? People will spend days planning their summer vacation or upcoming 40th birthday party, but many people refuse to spend even an hour on their financial planning, because they don’t want to think about it. While thinking about life insurance can be morbid, it is nothing compared to how a family will feel when one of their breadwinners passes away and leaves nothing behind but debt and bills.

Income

Life insurance, unfortunately, doesn’t insure your life. It should be called, instead, income protection. If something were to happen to you today, your income would stop. Most people when asked what their biggest asset is will mistakenly say, “My house, of course.” That is not true. Your biggest asset is yourself. Every year you bring in an income that allows your family to survive financially. By not protecting this income with life insurance, you are putting your family at a great risk. Do you have enough in savings and retirement that your family could financially survive? More than likely, you don’t. You need to have enough life insurance so that if you were to die prematurely, your family would still be receiving a portion, if not all, of your income for many years to come.

Funeral Expenses

How many times have you seen benefits where families are forced to sell plates of food in order to pay for a family member’s funeral? If people would just take the time to sit down and get their finances in order, including properly protecting themselves with adequate coverage, their families wouldn’t be forced to scrounge around for money just to bury them. If you are reading this and are not properly protected, imagine your family having to resort to extreme measure just to give you a proper burial. It doesn’t feel very good, does it?

Pay Off Debt

Life insurance coverage should be able to pay off funeral expenses, replace income for several years, if not for an entire lifetime, and pay off debt, including all credit cards, loans and the existing mortgage. Why do we want to pay off all of the debt, too, if we’re already replacing the income? Ask yourself this question. If you could somehow make your family’s life better, wouldn’t you? When you acquire coverage, get enough so that all debt, including the mortgage is paid off. This will give the house, free and clear, to your family, so you know they will never be without a home. They will also not be burdened with any unpaid debt and can save enough money to fund the children’s education or pay for retirement.

In addition to acquiring coverage, be sure that you have adequate coverage. The rule of thumb is to get at least 5 to 10 times your annual salary for each breadwinner in the house. Long gone are the days when only the father worked. So make sure each parent is protected well. Also, as we live in times when layoffs are abundant, it is not enough to have group insurance through work. What happens when you get laid off? That insurance does not go with you. Thus, you MUST get personal life insurance coverage that is NOT tied to your work. After all, who cares more for your family? You or your employer?