Everybody needs to have at least some life insurance coverage, even if you’re single and have no dependents. At a minimum, you should want a coverage to pay for your final expenses and to clean up any lingering obligations so that your loved ones are not burdened with them after your death. And you may want to tuck in some extra, just to give them some time to adjust your departure.
But there are many other reasons for having life insurance, which is why term life insurance may be the best money you ever spend. Term life insurance is not only less expensive than other forms of life insurance coverage, but it also enables you to buy more coverage, and that’s where the greatest benefit of all can take place.
What are some reasons why you might want to have a higher amount of life insurance coverage – and why term life insurance may be the best money you ever spend?
If you have little or no financial assets
Some people accumulate a substantial amount financial assets throughout their lives. It is even possible that they build up a portfolio that is large enough to take care of their loved ones in the event of their death. If you’re really successful in doing that, you may not even need life insurance – you’ll be virtually self-insured.
But if you’re like most people, who don’t come close to that level of financial wealth, you’ll have to make other plans to provide for your loved ones. If you have little or no financial assets, life insurance is one of the very best provisions you can make for your family. It will enable you to leave your loved ones with substantial assets, even if you have been unable to create them throughout your lifetime.
Term life insurance will enable you to do that more efficiently than other types of coverage. It is far less expensive than whole life insurance, that will allow you to take out a policy with a larger death benefit. That will leave your loved ones with far more assets in the event of your death.
If you have inadequate financial resources in general
Apart from financial assets, many people have little in the way financial resources in general. Financial resources – as they relate to your death – could include a large employer sponsored life insurance policy, Social Security survivors benefits, transferable employer retirement benefits, or even a small business to sell to raise cash.
If these resources will not be available to your family in the event of your death, life insurance is a way of making up for the absence.
This will be true in even with Social Security survivors benefits. Since Social Security benefits are tied to your income level, if yours has been below the amount to achieve the maximum benefit, your family may receive an inadequate benefit upon your death.
The largest term life insurance policy will help to provide for your family, at least by giving them a large cushion to supplement those Social Security payments.
If you have a family history of terminal illness
Many terminal illnesses are genetic. If you have a family history of terminal illness, having large amounts of life insurance may be especially important. This is even more important if the family history includes death at fairly early ages. The shorter that longevity is in your family, the more life insurance coverage you’ll need.
When you have very young children or other dependents
Term life insurance works especially well when you have young children, or other ongoing dependents, such as elderly parents. You’ll need to have a sufficient amount of life insurance coverage to provide for those dependents for many years after your death.
Term life insurance is the very best way to handle that, since the much lower premiums will enable you to buy substantially more insurance coverage. Where a single person with no dependents may be able to get by with a $50,000 life insurance policy, you may need one that will provide several hundred thousand dollars in coverage, and maybe even more than $1 million.
This is even more important if your spouse is not a significant breadwinner. He or she may need time – even several years – to be able to begin a career, and to gain the kind of experience and skills that will enable him or her to earn a living wage. A large amount life insurance will provide a cushion that will make that happen.
When you want to free up your cash flow for investing or debt payoff
One of the other major benefits of the lower premiums of term life insurance is that frees up your cash flow for other important purposes. This can include additional money for investing, or to payoff debt.
Many people are carrying large amounts of debt right now. Though everyone needs life insurance, eliminating debt may need to be a priority. That means you’ll have to keep all other living expenses low as possible, including your life insurance expense. Paying off debt also means that your survivors will need less income the event of your death, so it is a purpose worth pursuing.
Saving money for investing is also an important priority. Though you’ll need plenty of life insurance when you are young and your asset-base is low, the accumulation of a large amount of savings and investments can eventually replace the need for life insurance.
In either of these cases, term life insurance will enable you to have the greatest amount of coverage at the lowest possible price. That will enable you to focus your financial resources on either debt payoff or on savings and investments.
