Life insurance has a simple purpose: to help protect your family financially if you were no longer around. If you have a spouse, children, a mortgage and other debts, it’s an affordable and necessary product to help create stability no matter what life sends your way.
People often have significant expenses in mind when they buy life insurance for themselves, or life insurance for married couples — things like the mortgage, college tuition for the children, and shared debt that your grieving partner would otherwise have to face alone.
While life insurance can certainly help cover those expenses, it’s often valuable for smaller, “everyday expenses” like the grocery shopping, utility, and phone bills. A life insurance payout (called a death benefit) can be used in any way a beneficiary sees fit.
Here are seven common expenses people buy life insurance to cover.
Let’s start with the obvious – end-of-life expenses. Whether you’re single, married or have kids, most adults don’t think much about the cost of a funeral, and the reality is they aren’t cheap. The average funeral can be around $10,000. Grieving is hard enough – no one wants to stick their loved ones with a $10,000 bill at the same time. Fortunately, end-of-life expenses are precisely the sort of thing life insurance policies should be used to cover.
Even if you have a stable income, sticking to a budget each month can be an adventure — rent, utilities, car payments, car insurance, groceries, clothes, school supplies for the kids. It seems like the list never ends.
If you were no longer around, a life insurance payout could be used to prevent your partner from struggling to cover everyday expenses. The last thing a grieving partner should have to worry about is how they are going to meet ongoing financial obligations without you. Life insurance allows for the financial freedom to take this potential burden off their shoulders.
For many people, a house is one of their most significant assets and a key to their family’s financial stability for years to come. If you died and your partner faced the mortgage payments without your income, a life insurance policy could help protect your partner’s ability to pay the mortgage.
Knowing that life insurance proceeds can be put toward paying the mortgage can offer your spouse the freedom to make decisions that are best for your family during a trying time. For example, should they stay in the house? Should they pay off the mortgage entirely? Does it make sense to downsize? Should they move closer to family? The ability to afford the monthly mortgage payment buys an immense amount of flexibility, time and peace of mind for your family.
Debt. Many of us have it. Whether it’s student loans, mortgage debt, car loans, or even simple lines of credit, many of us have debts that would be left to a partner to pay off.
Even if you’re unmarried, there may be a co-signer who would be responsible for the outstanding debt you left behind. This point is especially important in this era of rising college costs and debt. In 2016, college graduates owed an average of $37,000 in student loan debt, and that’s just for a four-year degree. Those with advanced degrees have even more to pay back. If your loan isn’t federally funded, then it’s likely your co-signer would be required to take over the payments.
Whether it’s credit card, mortgage or student loan debt, a life insurance policy can be used to help your loved ones pay debts down, or from having to carry the weight of those payments after you’re gone.
Child care and dependent expenses
Kids are expensive. All parents know this firsthand. The federal government estimates that a middle-income family spends $12,980 each year per child. Per. Child. And, this does not include money saved for college.
One of the most important reasons for having life insurance is to protect your growing family – and all the hopes and dreams that come along with them. Life insurance can help protect your partner’s ability to afford childcare costs, after-school activities, grocery bills, college savings and all the other expenses that continuously seem to come up.
When you have children, or even if you have plans to grow your family soon, life insurance is the responsible way to help protect their financial future.
After 50 years of decline, the number of stay-at-home mothers has been increasing in recent years, according to the Pew Research Center. The center also reports that the number of fathers who stay home with the kids is on the rise too.
Primary breadwinners aren’t the only parents who need life insurance. Becoming a stay-at-home parent is usually a very deliberate financial decision made by the family. And, this decision is made because it can be more affordable for one partner to stay at home than to outsource all the work these parents do — which according to recent estimates, is actually around $112,962 a year worth of work.
It’s essential for both partners to hold individual life insurance coverage to help ensure the financial security and stability of the family’s future.
Leaving a legacy
There’s more to life than being sure the bills are paid. Many people also want to leave something extra to make things easier for their partners and children. Things like college tuition or a downpayment on a child’s first home.
If you die way too soon and are not around to save money, life insurance proceeds could be used to provide the funds needed to make such a heartfelt gesture.
It’s worth noting that in addition to life insurance, it’s important to speak with your attorney about establishing a living will to help direct your survivors’ financial actions after your death.
Buying the right life insurance for your needs
Even though there’s a lot to consider when choosing the right life insurance, the process of selecting an appropriate coverage amount and buying your policy is actually simple. An online life insurance calculator will take into consideration many of the factors above and give you a personalized recommendation for coverage. Once you know how much coverage you want, you can get your real rate and purchase a policy – online and from any device. That way you can get back to enjoying all the things that are so worth protecting and celebrating: your home, your kids, your partner, your future.
If you already know how much coverage you need, then there’s no better time than the present to get a high quality, affordable term life insurance policy.