Top 6 Reasons to
Get Life Insurance
People take out a life insurance policy for a variety of reasons; added a new member to your family, personal medical scare, death of a loved one and many other reasons spurn someone on to explore if life insurance is right for them. Don’t get us wrong there are easily another 6 items we could add to this list, it’s not exhaustive. Here are our Top 6 Reasons:
1) Have Dependents
2) Replace Future Earnings
3) Mortage, Rent or Other Debt
4) Children's Education Expenses
5) Final Costs
6) Critical Illness Protection
1) Have Dependents
Most people who take out a life insurance policy are doing so because they have people that rely on their income for their wellbeing, whether that’s a spouse, children, parents or multiple people. You’re a prime candidate for life insurance if you have people who rely on your income to keep and maintain their standard of living. Some questions:
- How would they pay the bills?
- How would their standard of living change?
- What changes would they need to make?
- What future plans would now be in jeopardy?
Life insurance can ease the financial burden and stress of losing a primary or a major contributor to the household income. Even if you and your spouse have similar incomes, 50% of income would be lost. Do the expenses drop proportionally? Likely not. The death benefit of a life insurance policy can help your loved ones maintain their standard of living and quality of life by providing them a financial boost. Learn the 7 Awesome Benefits of Term Life Insurance.
2) Replace Future Income
Life insurance replaces lost income and can help cover the immediate cash needs, as well as ongoing and future needs. Some examples of the the ongoing cash needs include:
- Utility Bills
- Transportation expenses
- Healthcare and health insurance
- University fees
- Spouses retirement
- One-off purchases like a child’s first car
There are many things to consider when determining how much life insurance you actually require, quite a bit more than you may originally think. At Tenzing, we take a calculated approach using a life insurance calcualtor such as the one from Unisure.
3) Mortgage or Rent
The place your family calls home is no good if they can’t afford the mortgage payment or the rent. This is a major consideration in determining how much life insurance you require. They could always sell, downgrade, re-finance the payments, but is that what you’d want for them?
“But Tenzing, I own my house ouright”
That’s awesome, you don’t require as much and can save some on your premium. Are you from a country with inheritance taxes?
- United Kingdom
- United States
- South Korea
Such a massive asset as a house, if you passed on such a great asset as a house to your kids, you could also be passing on a massive inheritance tax bill as well.
4) Children’s Future Education Expenses
It’s probably fair to say most people would like their children to be able to attend whichever university or institute of higher learning, without having to go into debt from student loans. Life insurance can help pay for the cost of continuing education for children at the projected tuition fees are by the time they reach the appropriate age.
With rising cost of university fees, it’s important to speak to an advisor, who can help you determine an appropriate level of coverage. If you’re only factoring in the cost of tuition now, then you’ll unfortunately be short. Here’s a quick study of the rising cost of education at the University of Oxford:
Source (download required)
It’s not hard to see the historical increases and project out where costs will be in 10 years, 15 years, 20 years, etc. When you factor in other university feeds for room & board, books and other miscellaneous expenses, it’s easy to see why university education alone is a massive reason to get life insurance.
Did you know?
A common way people determine their policy term length based on how long until their kids would (presumably) be financially independent. Ex. Youngest child is 5 years old, take 20-year term length.
5) Final Costs
The costs of burials & funerals are rising globally, from the grave plot, casket, cremation, service, the costs can easily top $10,000 usd.
If you’re an expat abroad, then there could easily be further expenses for cremation, casket arrangement, legal costs for repatriation of the body. This may be covered as part of your health insurance policy’s mortal remains benefits, but if it’s not, that’s easily another $10,000-$25,000 depending on preparation of the body and where the repatriation would be to. Life insurance can help pay for immediate final expenses.
6) Critical Illnesses
Life insurance is not purely about an untimely passing as most people think. With the average life expectancy rising as healthcare gets better, you’re more likely to get a critical illness and survive than ever before. Some stats to digest of how the global death rate has changed from 2000 to 2017.
So the questions to ask:
- What happens if you’re unable to work and your income stops?
- How long would your company retain you?
- What would happen to your health insurance?
- What about your income and other normal ongoing expenses?
See life insurance is so much more than just purely a death benefit. In fact, Critical Illness coverage may actually be more important when the chances of getting one and having it affect you personally are so high.
“The cost of a life insurance policy won’t bankrupt a family, but death or a serious critical illness could.”