The Necessity of Life Insurance

The costs that surround a death can be staggering. It is not unusual for funeral and burial costs alone to soar over $10,000. In fact, it is quickly becoming the norm. Combine this cost with the loss of income, medical bills, or other bills surrounding a death, and a surviving family’s finances can quickly spiral out of control. Now, the surviving family members are not only burdened with grief, they are also saddled with worry and stress over how they are going to survive. The fact is that much of this added grief is unnecessary and can be prevented with the simple act of purchasing life insurance.

 

Why Should I Worry About Buying Life Insurance?

The Necessity of Life Insurance

Life insurance is something that working age adults, particularly those with families, should not be going without. This is especially true because it is relatively cheap to buy. While there can be an argument made for both term and whole life, the important thing is that you need to have something.

Not only can life insurance pay for your final expenses, but it can help to replace your income as well.  Furthermore, it helps to provide your family with a financial cushion, just incase they feel unable to return to work immediately. It is cheap, provides protection for your family, and will help to secure their financial well-being should you pass away. It seems like a no-brainer, doesn’t it?

 

Do Young Adults Really Need Life Insurance?

Many younger adults wonder if they really need to purchase life insurance. Since they don’t have a family, is insuring their life really necessary? Besides, they are young. They are immortal.  They are never going to need life insurance anyway, right? Unfortunately, I’ve learned from both personal and professional experience that young people die a lot more often than anybody would like to think.

For some young adults, it may in fact be true that life insurance is unnecessary. If you have enough money saved so that your burial expenses are paid for, you may not need to carry it. However, for the majority of younger adults, life insurance is a necessary protection for their family (parents, grandparents, etc.) as well. Why?

Let’s assume that the unthinkable has happened, and you – a 24-year old recent college grad – died in a car accident. You financed the new car you bought shortly after your college graduation – an education that you also financed using student loans. Since you likely have a limited credit history, chances are that somebody in your family had to cosign those loans for you. Unfortunately, those loans don’t just go away and the responsibility of paying for them will fall to your cosigner. So now, your family is not only burdened with the grief of your death, but they are also saddled with the pain of your debts as well. If you are responsible enough to be living on your own, you should also be responsible enough to protect your family and carry some life insurance to cover your debts.

 

How Much Life Insurance Coverage Do I Need?

While financial luminaries like Dave Ramsey recommend that you should have coverage equal to 10 years worth of salary, we have decided to go with a little bit less than that amount. At the time that we purchased our life insurance policies, our death benefit covered all of our assets and more.  Now that we have children and a bit more net worth, we have considered increasing our coverage amount.  However, since we will be debt free in less than 3 years, we’ve decided against it. The house will be paid for, and my family could comfortably live off of my wife’s salary. So, while 10 years salary may be a good rule of thumb, you need to decide on the amount of coverage that is right for you based on your specific needs and goals for your coverage.

 

Unfortunately, death will come for all of us.  Often times, it comes when it is least expected. Purchasing life insurance is the best way to make sure that your family’s financial well-being is protected. Really, it is so cheap that there is no good reason not to have it. So, if you aren’t protected, make sure to go out and find some term insurance today. Trust me, your family will thank you for it.

 

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Jon Emge is a Senior Advisor and Content Manager at www.Lifequotes4u.co.uk. Jon is originally from America who moved to Liverpool because of his love for the Beatles. He is a published author and has assisted and advised clients on personal finance. In his spare time he enjoys listening to music, going to the odd festival and practicing his poetry skills!

 

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Comments

  1. I’d fall into the group of young people with no family to take care of and enough money saved up to cover any after-death expenses. So I have no intention of getting life insurance until I do have a family with kids. Anyone that does have kids definitely needs some kind of life insurance.

  2. Life Insurance says:

    Life insurance is essential, even if you’re young and bullet-proof as people die all the time that never saw it coming… we never do!!

  3. I can’t say I’ve ever read a morticians point of view on life insurance, but it certainly is a good one. Great write up, Greg. Thanks.

  4. As a financial advisor I also meet with a lot of people that have lost loved ones and were left without any life insurance…I can’t imagine how often you must see it though! It has to be at least over 50% of the people!

    I understand your point about not getting more life insurance in the short-term, but I’d encourage you to reconsider. Like most people you’ve mentioned, we never believe something will happen to us but it’s possible something could happen to you before you’re debt free. Get a 10-year term policy and make sure you’re REALLY covered for these next few years. For another $250k or $500k how much could it cost? $20/month?

    • Thanks for the comment Jason! I’d say you are probably right. Around half of the people we meet with have no life insurance of any kind – which can make our job a little tough.

  5. Nice write up! Interesting take on life insurance. I bet in your job you get to see both ends of the extreme. I agree that life insurance is a necessity, mainly for those with a family to support. There are so many companies that offer it, it really can make the price reasonable.
    Another option as well is to get group life through your employer, that is if they offer it. You can generally get coverage that would equal several multiples of your salary and it can be really cheap too.

    • Group life is great! I’m a big fan of any type of life insurance. I’m not huge on whole life because it doubles as a savings account with very little return…but I’d rather see that than nothing at all.

  6. My works pays for around $100K of mine, and I won’t add to it anymore until I have kids. Me and the boy have thought about taking it out on each other though, just in case something were to happen since we do have a house together.

    • Wow! That is a pretty nice group policy. It may not be a bad idea to add a little bit more, just so your house could be paid off…just in case.

  7. Wow, a sombering look at things. We have ins, but I’ve never thought of all the reasons it’s important for single, young adults.

    • Yeah, sorry to be a downer. It’s just something that I deal with every day, so I take it pretty seriously. Unfortunately, we should all know that we are going to die. Since it is bound to happen to all of us, we may as well plan for it.

  8. Great perspective. Whether you like the idea or not, like you said, the rates are absurdly low. Unless you can’t afford to eat and you have kids, just do it.

  9. Something else to consider for young folks who don’t think they need insurance: what if you end up getting sick or diagnosed with an illness? Insurance may then become that much more expensive and possibly unaffordable. Better to buy it when you’re young and healthy and avoid running the risk of not being able to get it later! It only costs $20-30/month for hundreds of thousands in coverage!

    • Thanks for stopping by Peter! I absolutely agree with you. There is no reason not to buy insurance when you are young. It is super cheap and can save you a lot of hassle in the future.

  10. GREAT article you have put together!!!!

    Having been a practitioner involved with life insurance over the past 21 years, I have unfortunately had to deliver my fair share of insurance checks. When I met people who have lost a loved one and now have to build them a financial plan, never once did I hear them say, “Boy, I’m so angry my life insurance agent sold me too much insurance!” Rather, I hear horror stories from widows who cannot understand why their husband didn’t take out more life insurance. Or, they assured their spouse that they would be ‘well taken care of’ if anything happened to them. This is the story for many families across America. Smart financial planning means not only looking at your overall financials, but assessing what types of coverages you will need at different ages in life.

    • Thanks for the nice comments Ted. I second everything you just said. In fact, I’ve often heard “I’m so glad that we have this insurance. I’m not sure what we would do without it.”

      “Smart financial planning means not only looking at your overall financials, but assessing what types of coverages you will need at different ages in life.”

      Yes to this!!!

  11. It’s always great to hear it from another perspective. I, too have life insurance–variable universal life–and I can’t complain. I have no dependents. But it’s a huge asset to supplement my retirement and of course in case something should happen to me.

    Great article!

  12. I had no idea about your day job. I think you could write a whole e-book on a Morticians view on Finances….perhaps a 2nd site?
    I’ve read a good number of life insurance posts today and find that those who work with people (advisors, coaches,etc) place much more importance on insurance. Once you hear the stories and see the tears, your view of finances change.

  13. Thanks for the idea Brent:) I think one site is enough work for now though;)

    I think you’ve made a great observation about those who work with people. I had never thought of it in that way, but I think you hit the nail on the head.

  14. That’s a tough job Greg. I went to a funeral recently and found myself wondering how hard it was for the people working there. I can’t imagine seeing people in that kind of pain on a daily basis.

    Your view on life insurance should be weighted more heavily than most.

  15. You guys, of course, have a very interesting perspective on this. What do you do when families come in who have no life insurance and no ability to pay for the funeral out of pocket? That has to be a very tough situation..

    • It is a tough and uncomfortable situation. What we try to do is steer them towards services that they can afford. Unfortunately, in many areas, funeral homes no longer extend credit to families, meaning that funerals have to be paid for before they are performed. At first glance, this seems rather harsh. However, this happend because funeral homes would have tens of thousands, even one hundred thousand dollars or more in accounts receivables and bad debt at the end of the year. It is hard to keep your doors open that way. So, it is a delicate line to have to walk between being compassionate and caring and still operating a sound business.

  16. Unfortunately most people don’t understand how expensive a funeral is until someone close to them dies and they are responsible for making the arrangements. When my mother died her casket alone was 6 or 7K.

    I must admit when I was a student out on my own I didn’t have life insurance. The first time I did was when I started my first job in the corporate world and it was part of my benefits package. Today my husband and I each have a half million dollars in coverage and we pay a monthly premium of $70. I wouldn’t feel comfortable living without it. Our next priority (put off way too long) is getting our wills done.

    • Unfortunately, I don’t have my will done either. I really need to do that.

      Luckily, my parents carried some life coverage on me while I was in college. Now, I obviously take care of it on my own. I wouldn’t feel comfortable without it either!

  17. My father died at age 21(!) while my mother was pregnant with me, and while I grew up pretty poor, there was enough life insurance for her to buy with a cash a modest home for us. It made all the difference. I have no doubt if not for that life insurance we would have been bouncing from cheap apartment to cheap apartment our whole lives. You better believe I got life insurance as soon as I got pregnant!

    • I’m so sorry that your family had to go through that. Yet, I’m so glad that your father had prepared for the worst. Thanks for dropping by Jen!

  18. As a single income household with a 16-month old, life insurance is an absolute necessity. I have a policy through my employer for 5 times my salary, and I have a separate term policy for $500k.

  19. That is awesome Justin! It sounds like you have it covered.

  20. Life insurance is definitely a responsible way to make sure your family isn’t left in mounds of debt and struggling.

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