Why Do I Need Life Insurance?
Updated: Oct 10
Life insurance is widely used to reduce potential financial burdens that loved ones could face if the policyholder were to pass away. Assuming you have people that you love, life insurance is a very important financial product and should be seriously considered.
Lifestyle, circumstances, and needs differ for each individual. A good insurance product takes all these factors into account, to make sure you're covered correctly, sufficiently, and in accordance with your unique lifestyle. Here are several reasons you might need life insurance to help protect your loved ones from potential financial burdens and costs.
Young Parents: You Have Children to Support
Having children comes with the responsibility of financially providing for them, and that responsibility doesn't necessarily end with your passing. In the event that you pass away while your child is still young, you'll want to make sure they have the finances necessary to pursue life as you would like them to. In other words, they'll need money for extracurricular activities, school, and recreation, not to mention food, clothing, housing, and other necessities. If you have a baby, toddler, or another young child, life insurance can make sure they'll be able to pay for life's needs even if you aren't there. A term life insurance policy that lasts into their adulthood offers protection against such a tragedy at an affordable cost and stable price. Term life policies are affordable enough that you can fit their premiums into your budget even if you have a young family and a moderate income.
Stay-At-Home ParentDon't assume a stay-at-home parent has no economic value. On the contrary, even if you are not employed outside the home, you do have a job inside the house. If you don't have a traditional job, there are significant costs related to childcare and the household duties you perform, which would be outsourced in the event of your death. We highly recommend that a stay-at-home parent is covered with a term life policy in addition to the main breadwinner, especially when there are young children at home.
Parents of Teens: Your Children's College Should Be CoveredOnce your children reach the teenage years, the need to cover their living expenses slowly decreases as the number of years before adulthood diminishes. A new challenge arises, though. You'll want to make sure their college will be paid for even if you aren't around to help cover rising tuition bills. In this situation, a term life insurance policy with high coverage and a short term can help make sure your children will have the financial backing and funds necessary to complete college. Make sure the coverage pays for at least undergraduate schooling and housing for each child, and consider covering graduate school as well. The policy term will probably be between 5 and 15 years, depending on your children's ages and how long you want to financially support their college career.
First-Time Homebuyers: Your Mortgage Should Be CoveredFor most homeowners, the house is the most valuable asset they'll ever own. Therefore, it's important to consider potential issues when entering into home ownership.
One thought that ought to be considered is what would happen to your home if you were to pass away. If you have a spouse and/or children, you'll want to make sure they can afford to stay in the house without it becoming a financial burden to them.
Term life insurance can help make sure your loved ones can continue to afford your house if you're no longer there to help with the mortgage payments. A policy that's equal to the outstanding balance on your mortgage, and lasts as long as the mortgage, will be highly affordable and make it easy for your family to pay off the mortgage if they need to.
Freelancers: You Don't Have Coverage Through an EmployerFreelancers in the above situations need life insurance for the reasons cited above. Even if none of the aforementioned situations apply to you, however, you should still have at least some life insurance if you're working in the gig economy.
Specifically, you should have a small policy that can help cover funeral and burial costs if you pass away. Many employers offer small life insurance policies that can help mitigate these end-of-life expenses in their employee benefits packages, but freelance work doesn't come with any such benefit. Therefore, you'll need to purchase coverage on your own in order to remove this potential burden from loved ones. A term policy that covers funeral and burial expenses comes with especially low rates.