One of the most frequently asked questions we get about life insurance is this: “Is life insurance worth the cost?”
It’s a fair question. Purchasing a term life insurance plan varies depending on your specific coverage needs, but you might end up paying anywhere from $15 to $100 a month for anywhere from 10 to 40 years.
That’s a lot of money over time, and adding any expense to the monthly budget can seem inconvenient. Some people who don’t fully understand what benefits life insurance (and specifically, term life insurance) have to offer may deem it unnecessary. They may put off buying it or never purchase coverage at all.
But here’s why term life insurance is worth the cost and how to make sure that you’re not overpaying for coverage.
Table of Contents
Why Life Insurance Is Worth It
Insurance isn’t really something that is at the top of anyone’s wishlist. It’s not exciting or flashy, and it isn’t something that people really want to buy. But it’s something that you probably need.
If you have property, debt or people who depend on you for your income, your insurance benefits, or your caregiving, you really do need life insurance. The coronavirus pandemic has reminded us all that life can change drastically at any moment, and none of us — not even the healthiest or youngest — are promised tomorrow.
If you don’t have a plan, and something happens to you, your family could be left in a difficult position.
For example, say you’re a teacher who makes $60K a year. You’re married, with two young children, and just bought a new house (complete with homeowners insurance). Your spouse works for a start-up company, so they go through your insurance to get health benefits.
If you were to pass away unexpectedly due to an accident or illness, your spouse would be left to pay the mortgage debt on their own. They would no longer have health insurance. They would have to provide monetarily for all of your children’s expenses on their own, including childcare while working full-time. And they would also have to cover the cost of your funeral and/or end-of-life expenses on their own.
The reality is that they just may not be able to do all of that; they would likely, in that scenario, be facing massive debt, foreclosure, or bankruptcy.
That’s not the kind of legacy you want to leave for your family. If you have life insurance, they get a coverage amount that is paid out to them if anything happens to you, which helps with the costs mentioned above.
Life insurance is peace of mind and a guarantee of protection — that’s what makes life insurance worth it!
Why Permanent Life Insurance Isn’t Worth It
Life insurance in general is worth the cost, but not every type of life insurance or life insurance policy is worth the value that you’re paying for it.
There are two broad categories of life insurance plans: whole life and term life. Whole life insurance, also called permanent life insurance, offers you coverage for your entire life. You pay premiums every month until you pass away, at which point your beneficiaries receive the coverage amount. Whole life plans also may come with a cash value (an investment component).
At first glance, permanent life insurance may seem great, but it’s important to remember what the purpose of life insurance actually is — to protect the people you love from the financial impact of your passing.
When your family is young, they need that protection, but the older you get, the extent that the people you love rely on your income lessens. Kids will grow up, move out, and become financially independent; the principal on your mortgage will have decreased; your savings will have increased.
There comes a point where you won’t need much coverage, or won’t need coverage at all. Because permanent life plans are going to be paid out no matter what (whenever you pass away, whether you are 40 or 80), and because they have a cash value/investment component, they are much more expensive than term life plans.
If you are paying the same amount of money every month for the same amount of coverage for your entire life, you’re overpaying. Permanent life insurance isn’t worth it!
Why Term Life is Worth the Cost
Term life insurance offers protection for a predetermined term, or period of time. Usually, this is 10 to 30 years, although Everyday Life is one of the few insurance companies that may recommend 40-year policies.
These types of life insurance plans are much cheaper than permanent life plans because they provide simple, straightforward, temporary coverage.
You pay a monthly premium for the policy’s duration until the policy ends. If something happens to you during that time period, your family is protected. If it doesn’t, your insurance company doesn’t make any extra money off your premiums as they do with permanent life plans when there is a cash value involved.
Term life is designed to give you affordable coverage and peace of mind.
Why Everyday Life is the Best Deal
Term life insurance is worth the cost, but not all term life plans are created equal. You shouldn’t blindly pick a term life policy without shopping around to get the best price for your coverage needs.
Most term life insurance companies offer one bulk price for coverage for the life of the policy. That’s a better value than what permanent life offers, but it can still result in you overpaying for coverage you don’t actually need towards the end of the policy’s term.
Everyday Life Insurance plans automatically adjust your coverage based on major life events like getting married, giving birth, buying a home, kids graduating, etc., so your coverage and your monthly premiums decrease over the life of the plan. That’s right, you end up paying less as you get older!
This ensures that, when you have one of our needs-based term life plans, at any given point in time, you are only paying for the exact amount of coverage you need at that moment. Choosing an Everyday Life term plan can save you thousands of dollars compared to traditional life insurance plans.
Interested in learning more about how our term life policies work? Use our Ultimate Life Insurance Calculator and find out how much you could save!