Should You Invest in Life Insurance?

Life can be complicated. In your working years, many experts recommend life insurance. There are many types of life insurance, and the cost can be very affordable to expensive.

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Should You Invest in Life Insurance?
4 Min Read October 20th, 2022

When it comes to your financial future, you need to think about a lot of things. Do you have a mortgage or other debt that needs to be paid off? Are your children starting university soon, or will they need costly post-secondary education? How will you fund your retirement? 

What will happen if you die before you’re able to retire? Should you invest in some kind of life insurance policy instead? If you’re an adult with dependents, thinking about life insurance may be ideal. Read on to learn more about why you might need life insurance and which type of policy may be the best for you.

What is Life Insurance?

Life insurance is a contract in which the insurer agrees to pay out a death benefit in exchange for a regular payment called a premium. This agreement exists between you and the insurer. You’re the policyholder who pays the premiums. If you die while your policy is in force, your beneficiaries receive the death benefit. 

The death benefit is the amount paid out to your beneficiaries upon your death. Depending on the type of policy, death benefits can range from a few thousand dollars to several million dollars. The premium you’ll pay is determined by the amount of death benefit you’d like your dependents to receive. 

For example, a $250,000 death benefit may cost about $46 per month for a 40-year-old man. There are two main types of life insurance: term life insurance and permanent life insurance. The type you need will depend on your specific circumstances.

What Kinds Are There?

You have dependents or debt that needs to be covered. Life insurance may help cover the cost of your funeral and any other debts your family may be liable for if they are left without a way to pay.

If you’re worried about your family’s financial future, life insurance can be useful in providing your family with a reliable source of money while they find a new means of income. Here are different types of life insurance

  • Term Life Insurance 

This package is a death benefit that is paid to your beneficiaries for a set period of time. When the policy expires, it expires with it. 

  • Whole Life Insurance

Whole life insurance is a combination of term life insurance and a savings plan. It’s designed to provide a death benefit to your beneficiaries for the rest of their lives.  

  • Universal Life Insurance

It’s similar to whole life insurance but with more flexibility. The death benefit can be adjusted at any time, and the death benefit may be paid to your beneficiaries as a lump sum.

  • Money Death Insurance

Money death insurance, also called cash-value life insurance, is a permanent life insurance policy. It can be used as an investment with a death benefit attached.

  • Where to Find It?

Before you shop for life insurance, you need to decide how much coverage you need. To do this, you could estimate your family’s financial obligations in the event of your death. 

You could start by making a list of your family’s financial obligations. What are the costs of your funeral? What is the debt you have, such as a mortgage or student loan? What would your spouse need to earn to support the family? 

Once you have a clear idea of your family’s financial obligations, you can start shopping for a life insurance policy. It’s important to do research and compare life insurance quotes from several different companies.  

Remember, the premiums you pay may be the only thing you can control when it comes to life insurance. The higher your premiums, the more coverage you’re likely to receive.

When You Don’t Need Life Insurance

If you don’t have any dependents or debt, you may not need life insurance since it’s probably not worth the cost. If you’re young and healthy, you may not need to get life insurance either. However, you should keep in mind that your living expenses will increase as you get older. 

The question of whether or not you should invest in life insurance may not come up until later in life. After all, when you’re in your 20s or 30s, retirement can feel like it is so far away that it almost doesn’t matter if you start saving for it now or later. But as you get to your 40s, it’s likely to become a really important issue.  

If you have no debt and have a good cash flow, then you’re probably in a comfortable financial situation. If your spouse is okay without your income, you might be able to get by without life insurance. If your spouse has a good job and financial stability, life insurance may not be necessary.

Conclusion

As your financial situation changes, so should your approach to investing. Getting married, buying a house, and having a baby can all have a big impact on your ability to save for the future. That’s why it may be important to reassess your investing strategy from time to time as these events occur and modify how you prepare for what lies ahead. 

The fact of the matter is that unless something unexpected happens, retirement will eventually be here. And if you don’t have enough saved up by that point, life insurance can help bridge the gap between what you have and what you may need.

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Editor's Note

Thinking about the impact of long-term health on your family and finances should also be a vital part of retirement planning.

Long-Term Care Insurance has become a big part of many people's retirement plans. Not only are families concerned with protecting their 401(k) and other savings, but they want access to quality care in the setting they desire without burdening those they love. 

Most states participate in the Long-Term Care Insurance Partnership program that offers additional "dollar-for-dollar" asset protection. Many financial advisors are unaware of this critical asset protection.

There is a perception that Long-Term Care Insurance is expensive. While it can be, for most people, it is very affordable. Premiums do vary dramatically between insurance companies and product types. When a policy is purchased younger and when someone is in fairly good health, premiums can be very affordable. 

Have Questions About Long-Term Care Planning?

You might have questions about long-term health care planning, and LTC NEWS provides the answers for many of the most asked questions here - Frequently Asked Questions.

Find all the resources available on LTC NEWS - Resources for Long-Term Care Planning.

Other essential resources to review:

How About Elderly Parents?

If your older parents or family members are declining and need help now, what can you do to help? You can get help finding quality caregivers or long-term care facilities and get recommendations for a proper care plan, whether or not they have an LTC policy. - Filing a Long-Term Care Insurance Claim.

If your loved one is lucky enough to own a Long-Term Care Insurance policy, be sure they use it. Sometimes families wait, thinking they can save the benefits for a rainy day. Waiting on using available Long-Term Care Insurance benefits is not a wise idea. 

Is a Reverse Mortgage Helpful? 

Today's reverse mortgages for those aged 62 and older could be an ideal resource. You can fund a Long-Term Care Insurance policy OR even provide money to pay for care if you, or a loved one, already needs help and assistance.  

You might be eligible at younger ages as well. 

Some people have much of their savings invested in their homes. With today's reverse mortgages, you can find ways to fund care solutions, care itself, and even help with cash flow during your retirement. 

Learn more by asking questions to an expert. Mike Banner, LTC NEWS columnist and host of the TV Show "62 Who Knew," will answer your questions regarding caregiving, aging, health, retirement planning, long-term care, and reverse mortgages. 

- Just "Ask Mike." - Reverse Mortgages | LTC News.

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