OK, sure, life insurance may sound like the most “adulting” thing ever. But there’s a good chance you and those you care about would be better off if you got a policy.
Plenty of people need life insurance . . . and don’t even know it. According to one study, about 40% of Americans don’t have any life insurance coverage at all. Among those with coverage, 1 in 5 say they don’t have enough.
Overall, we believe there are too many reasons people convince themselves they don't need life insurance.
One big reason people put off getting life insurance is because it sounds expensive. But there’s a good chance it’ll cost less than you imagine: 44% of millennials overestimate the cost of life insurance by five times the actual amount, according to the same industry study.
Here are our top seven reasons you might need life insurance.
If you were gone, life insurance could give your loved ones more breathing room when it comes to money.
Here’s how life insurance actually works: A life insurance policy is an agreement between you and an insurance company saying that if you pass away while the monthly payments are paid-up, the insurer will make a lump sum payment to the person you choose. That person’s called your “beneficiary.” (Here’s more on how to choose a life insurance beneficiary.)
So, for example, let’s say you have a spouse and young kids. If you were to unexpectedly pass away while your kids are still young, would your spouse be able to handle everything financially without you? What about your funeral and other last expenses? What about the cost of additional childcare?
Life insurance could contribute toward any of those things, and help keep your family afloat in your absence. (Full disclosure: Fabric sells term life insurance.)
If you leave behind a mortgage, the person who inherits your home could be responsible for paying it off. And if that person doesn’t have the cash to keep up with your mortgage payments, he or she may be forced to sell the house.
If you want to avoid that situation and help your survivors keep living in your home, life insurance might be a good fix.
Many work plans offer too little coverage. A general rule of thumb is that your life insurance coverage should be at least five times your current salary, but many employer-sponsored plans max out at $50,000. For most people, that’s simply not enough.
Plus, when you leave your job, you’ll usually forfeit the life insurance that came as an employee benefit. You might have an option to convert your group policy to an individual policy that you can take with you, but your monthly premium payments would likely go up when you do so. If, instead, you choose to buy your own policy at that time, it’ll probably cost more to do so because you’ll be older than you are now.
(Here’s more info on why your life insurance through work may not be enough for your needs.)
If you have student debt, you’re not alone: 44 million borrowers have $1.5 trillion in student loans. And the question of what happens to your debt if you were to pass away is a tricky one.
Your co-signer (and in some cases, your spouse) may be on the hook for your debt if you pass away. Federally funded loans would be discharged, but not all private loans will discharge the remaining balance. Did your parents co-sign your loans back when you were a teenager? They could be held responsible for any remaining debts.
Life insurance could potentially pay it all off so they don’t need to deal.
If you have any joint account holders on your debts (such as credit cards), those people would continue to owe money after you pass away. And even if you don’t have joint account holders, any outstanding debts could reduce how much you pass on to your heirs. For example, if your estate can’t pay off your car loan, the car could be repossessed.
If you want to make sure that your nest egg goes to your loved ones rather than paying off your debts, life insurance could make sense for you.
There are a few reasons entrepreneurs have unique life insurance needs:
If you die unexpectedly, life insurance could help your business partner continue the company without you.
Some business partnership agreements and succession plans even include life insurance as a necessary component.
Life insurance could help your co-owner pay off business liabilities and debts in your absence.
An insurance policy could help protect your personal property if you put it up as collateral for the business.
You might need life insurance in order to secure a small business loan from the government.
Perhaps above all, life insurance could give your partner a little more breathing room and time to decide what to do next.
The older you are when you purchase a policy, the higher your monthly rate will likely be. Locking in today’s rates could mean a lot of savings down the road.
A term life insurance policy is often the most affordable way to secure coverage to help protect you and your family. (Here's the difference between term and whole life insurance.)
So, what are you waiting for? Check out term life insurance through Fabric now.
Fabric exists to help young families master their money. Our articles abide by strict editorial standards.
Fabric by Gerber Life exists to help young families master their money. Our articles abide by strict editorial standards.
Information provided is general and educational in nature and is not intended to be, and should not be construed as, financial, legal, or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. We make no warranties with regard to the information or results obtained by its use, and disclaim any liability arising out of your use of, or reliance on, the information.
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Term Life Insurance Policy Series ICC22 2205-4004 WSA and Accelerated Death Benefit Rider policy series ICC22 2205-2623 WSA (and state variations where applicable) issued by Western-Southern Life Assurance Company, Cincinnati, OH which operates in DC and all states except NY, and distributed by Gerber Life Agency, LLC using Fabric Technologies. Gerber Life Agency, LLC is an affiliate of Gerber Life Insurance Company (est. 1967). All are members of Western & Southern Financial Group (Western & Southern). Issuance of coverage for Term Life Insurance is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Product provisions, availability, definitions and benefits may vary by state. Payment of benefits under the life insurance policy is the obligation of, and is guaranteed by, the issuing company. Guarantees are based on the claims-paying ability of the issuer. Products are backed by the full financial strength of the issuing company.
All sample pricing is based on a 30-year old F in Excellent health for the coverage amount shown and a 10-year term policy, unless otherwise stated. Gerber Life Agency, LLC (GLA) is an insurance agency licensed to sell life insurance products. GLA will receive compensation from Western-Southern Life Assurance Company for such sales. The NAIC Company Code for Western-Southern Life Assurance Company is 92622.
Western-Southern Life Assurance Company's A+ Superior A.M. Best Rating: Superior ability to meet ongoing insurance obligations (second highest of 13 ratings; rating held since June 2009). Ratings are subject to change from time to time. The ratings shown here are correct as of 09/03/2022. For more information about a particular rating or rating agency, please visit the website of the relevant agency.
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In the State of California, Gerber Life Agency, LLC is known as and does business as Gerber Life Insurance Agency, LLC.