Life Insurance at Any Age: Why It’s Worth It

Article • 4 minutes

By Matic

Dad raising baby in air, mom is laughing

Many individuals delay getting a life insurance policy. But putting off this important task can result in a lot of unfortunate financial consequences in the event you unexpectedly pass away. So is life insurance worth it? Explore common scenarios in which it can immensely help those you leave behind along with other benefits associated with life insurance.

Who Needs a Life Insurance Policy

Life insurance is a financial planning tool that provides your beneficiary with a death benefit in the event you pass away while the policy is active. In order to keep the policy, you’ll pay a premium that’s usually due monthly, quarterly, or annually.

If you’re wondering if the cost of life insurance is worth it, start by thinking of your responsibilities. The most crucial time to purchase a policy is when you have dependents, whether you support them financially or with your time and service. Here are two major stages in life during which it’s particularly important to consider including life insurance as part of your financial plan.

Parents With Children at Home

Parents with children at home benefit from a life insurance policy with a death benefit that is large enough to cover major existing debts (like a mortgage or car loan) as well as future expenses (like college tuition).

Both parents should take out a separate life insurance policy, even if only one parent works outside the home while the other stays home to manage family life. If the earning parent passes away, the policy helps replace that lost income and eliminate some bills. And if the primary caretaker passes away, the surviving spouse could use the policy’s death benefit not only for funeral expenses, but also for daycare or nanny services for young children.

First-Time or Upgrading Homebuyers

It’s smart to take out a life insurance policy (or update an existing one) anytime you make a major purchase, especially when buying a home. As you take on larger debt, you want to ensure your surviving family members won’t feel financially pinched by the new mortgage payment.

Whether you’re making a first-time purchase or climbing up the property ladder to a more expensive home, get a life insurance policy that covers that new mortgage balance. The last thing you want is to add financial stress to your family during a time that would already feel emotionally overwhelming.

Retirees

Older individuals should also consider life insurance. Your surviving spouse could take a huge financial hit because of lost Social Security benefits if you pass away. Depending on the situation, they may also have major outstanding medical expenses to contend with. Purchasing life insurance gives your surviving spouse a way to maintain his or her current lifestyle without worrying about how to cover existing expenses and potentially new ones as well — all on a reduced income.

Many parents with grown children also use life insurance as a way to leave an inheritance. You can list as many beneficiaries as you’d like and use it to leave a larger estate after you pass away.

Why You Should Buy Life Insurance: Long-Term Benefits

Depending on the type of policy, you could use your life insurance as a savings vehicle. Some types of permanent life insurance offer a cash value component, so you can tap into those funds later in life if a financial emergency occurs.

Term life insurance doesn’t let you access any funds beyond the death benefit, but the cost is typically low enough where it’s usually worth the expense. Take a look at this example. Say you take out a $500,000 life insurance policy for 20 years. The monthly premium is $30, making the entire plan cost $7,200 over the 20-year period. If you were to pass away during that period, the funeral alone could cost that much — if not more.

You’d also be leaving your family with plenty of financial security. And if you happily live past your term length and don’t end up using the death benefit, then you’re only down $360 a year.

That’s a small price to pay for peace of mind.

Final Thoughts

When should you get life insurance? The sooner you purchase a policy, the less expensive it will be. Assess both your current financial needs and ones that are likely to crop up over the next few decades to guide your decision on the best type of life insurance and the amount of coverage you need.