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.
This article is meant to provide general information and not to provide any specific legal advice or to serve as the basis for any decisions.
Fabric isn’t a law firm and we aren’t licensed to practice law or to provide any legal advice. If you do need legal advice for your specific situation, you should consult with a licensed attorney and/or tax professional.
Fabric Insurance Agency, LLC offers a mobile experience for people on-the-go who want an easy and fast way to purchase life insurance.
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Blame participation trophies or the fact that many millennials entered the job market around the time the Great Recession hit, but millennials sometimes have a hard time shaking a reputation for being stuck in extended adolescence. The truth is, the generation that coined “adulting” as a verb has been grown up for a while now. Most millennials have already seen our 10-year college reunion come and go, or we may face the shock of hearing we’re experiencing a “geriatric” pregnancy (at 35, really?). As your life grows to include more responsibilities and loved ones who depend on you, it’s time to consider whether life insurance might be the right next step.
Top signs of “adulting” include saving money, doing taxes, and signing up for life insurance, according to Fabric’s new research. Read on for more surprising insights.
Accidental Death Insurance policies (Form VL-ADH1 with state variations where applicable) and Term Life Insurance policies (Form ICC16-VLT, ICC19-VLT2, and CMP 0501 with state variations where applicable) are issued by Vantis Life Insurance Company (Vantis Life), Windsor, CT (all states except NY), and by The Penn Insurance and Annuity Company of New York (NY only). Coverage may not be available in all states. 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. Policy obligations are the sole responsibility of Vantis Life.
All sample pricing is based on a 25-year old F in Excellent health for the coverage amount shown. All samples are for a 10-year term policy, unless otherwise stated. Term Life Insurance policies (Form ICC16-VLT, ICC19-VLT2, and CMP 0501 with state variations where applicable) are issued by Vantis Life Insurance Company (Vantis Life), Windsor, CT. Coverage may not be available in all states. 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. Policy obligations are the sole responsibility of Vantis Life.
A.M. Best uses letter grades ranging from A++, the highest, to F, companies in liquidation. Vantis Life’s A+ (Superior) rating, which was reaffirmed in April 2020, ranks the second highest out of 16 rankings. An insurer’s financial strength rating represents an opinion by the issuing agency regarding the ability of an insurance company to meet its financial obligations to its policyholders and contract holders and not a statement of fact or recommendation to purchase, sell or hold any security, policy or contract. These ratings do not imply approval of our products and do not reflect any indication of their performance. For more information about a particular rating or rating agency, please visit the website of the relevant agency.
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