Many people say the very thought of starting the life insurance buying process stresses them out. It's one of the main reasons why millions of Americans put off buying the coverage. And while the reasons to buy insurance are different for everyone, the decision to purchase life insurance is, at its core, all about providing financial security for yourself and the ones you care about.
If the thought of it stresses you out, just breathe. Here is a cheat sheet to know if it's time for life insurance.
1. Getting married
The earlier you buy life insurance, the more affordable it is. So if you're married at 30, your rates will be locked in when your policy goes in-force. You're also sharing debt once married. If something were to happen to you, some types of debt are passed along to your spouse. You'd want them to be able to pay it off and that's where life insurance would come in handy.
2. Having a child
A life insurance policy can help ensure a secure financial future for your growing family. If you or your partner were to pass away, the benefits could be used to help replace income, pay off debt, cover living expenses or pay for your child's future college expenses. Most healthy younger parents will buy term life insurance, as it's generally more affordable than permanent life insurance. And because you are focused in this case on a set period of time when your children will need financial support (say, their first 18-22 years), purchasing insurance with an expiration date might make sense for your family.
3. Supporting aging parents
Most times, aging parents end up needing help from their adult children because their own finances aren’t in the greatest shape. You can actually take out a life insurance policy for them to help with covering a debt, a permanent policy to cover estate taxes, and a final expense policy to cover a funeral.
4. Buying a house with a mortgage
Life insurance like term life or whole life insurance can be used to pay off a mortgage. Your beneficiary will be able to spend the death benefit as they see fit, whether that's paying off a mortgage, paying down student debt, credit cards, medical expenses or any other needs.
5. Taking out a loan
It's easy to borrow against the cash value of a permanent life insurance policy. There aren't any loan requirements or qualifications (other than the amount of cash value) and the funds can be used for any purpose and paid back whenever you decide, plus a life insurance policy loan has relatively low-interest rates.
6. Starting a business
A life insurance policy is often the cornerstone of a business's succession plan. When a business uses life insurance as the funding vehicle of a buy-sell agreement, the death benefits are used to purchase a deceased partner's share of the business from their estate.
7. During a recession
If the worst-case scenario were to happen, a term life insurance policy can provide much-needed financial security — and this security becomes even more important when times are tough. Life insurance is designed to help your loved ones cover the cost of your funeral, pay off bills and debts and plan for the future, all of which might be harder to fit into a budget during a recession.
8. Becoming stay-at-home parents
Because couples often assume that only the income-earning parent needs life insurance, they often skip out on coverage for the stay-at-home parent. It’s a mistake, though, to overlook the financial support that a stay-at-home parent provides. You would have to pay for day care or a nanny if something were to happen to the stay-at-home parent in your family. And that’s a pretty hefty expense by itself.