Your Guide to Life Insurance

Life Insurance

Life insurance can protect the financial stability of your dependents and heirs.

Statista estimates that, as of June 2020, only 54% of American adults own life insurance. There are many reasons people choose to opt out. Among the most commonly cited is the cost. Some people also believe they do not need it. Potential buyers might even have misconceptions about how it works.

What Are the Features and Benefits of Life Insurance?

Death is inevitable. Life insurance is one of the most cost-effective measures adults can take to ensure their loved ones are cared for when they pass away.

No Taxes

One myth Statista debunked is related to the tax treatment of life insurance. It reminds readers that beneficiaries do not pay taxes on the amount inherited. The IRS does not consider it taxable income.

No Probate

Nerdwallet confirms that life insurance policies are not subjected to probate proceedings. Provided the insurer does not find cause for scrutiny, beneficiaries receive payouts almost immediately.

Large Payouts

These policies allow people to leave large sums of money to their loved ones that they might not otherwise have access to. Common coverage amounts can range from $10,000 to several million.

Build Equity with permanent life insurance

It works similarly to a savings account. You can add cash and even borrow against the dollar value.

Who Would Use Life Insurance?

Anyone over the age of 18 can be eligible for these products, but not everyone needs it. These are the people who might need it most.


People who care for others need life insurance to ensure their dependents’ financial futures remain certain. These include parents and adults who care for senior relatives.


Life insurance policies give older people peace of mind. It ensures that their beneficiaries receive money to cover funeral expenses and move forward.


Primary breadwinners often worry about what happens if they pass away. One way to reduce that pressure and fear is to get life insurance.

High-Risk Workers

Workers in some high-risk fields are often encouraged to purchase life insurance policies. These include construction, farming, mining and firefighting.

Ill People

People who suffer from chronic illnesses should also consider purchasing life insurance. Illnesses do not automatically disqualify someone from life insurance, but it might lead to higher premiums.

Persons With Debt

When people have a lot of debt and creditors might make claims on the estate, their heirs or beneficiaries might not receive much. Life insurance policies are not subjected to credit claims.

When Should You Get a Life Insurance Policy?

Age is the main determining factor of your insurance premiums. It is one of several factors to consider when buying.

Going to College

College years can be expensive for parents who use life savings or take on debt to send their children to school. This type of policy can help secure that investment.

Co-Signing on Loans

When someone co-signs on a loan, he or she takes on the risk of paying that debt if the other person defaults or dies. These policies can help protect the co-signee in a scenario where the borrowe passes.

Starting a Family

Parents can safeguard the futures of their children by taking out policies and naming the children or trusts as beneficiaries. Spouses can also take out policies to safeguard each other.

Starting a Job

When you start a new job, your employer might have an affordable life insurance policy. Some employers might even cover the cost of very basic plans. Take advantage of this whenever possible.

Examples of Using Life Insurance

Example 1

Chang is a successful entrepreneur whose business makes seven figures. However, he also took on large debts. Should he pass away, creditors could take his business and leave nothing for his family. To reduce the likelihood of this happening, Chang invests in permanent life insurance. In his dry seasons of business, he can also borrow against the balance and repay it during more lucrative months.

Example 2

Jamie has recently beaten cancer, but the doctor thinks it might return. Nevertheless, Jamie wants to fulfill her dream of being a nurse, so she enrolls in college. She convinces her parents to take out a policy for her. In her third year of college, Jamie’s cancer returns and she passes away. Her parents receive $1 million, which covers the debt for school, pays her burial fees, and replenishes their retirement accounts.

Steps for Getting the Right policy

Even if you are unemployed or self-employed, there are organizations that might still make insurance affordable. Here are some simple steps you should follow:

  1. Start by determining whether term or permanent life insurance is right for you.
  2. Decide on the amount of coverage you believe best suits your needs and budget.
  3. Shop around for rates via your employer, organizations you are a member of, and direct queries.
  4. Check customer reviews of insurance providers to narrow down your options.
  5. Apply for a policy that fits your needs.

Quick Questions

How much does life insurance cost?

Costs vary widely, depending on age and coverage cost. As an example, policy buyers in their 30s can receive a $500,000 policy for 20 years and pay roughly $30 per month.

How much insurance do I need?

Consider the financial obligations you will leave behind, including the financial obligations of your dependents. From there, anything else is a nice bonus.

Can I name multiple beneficiaries?

Yes, you can. You can also add contingency or secondary beneficiaries, so these people receive the money if your primary beneficiaries have also passed away.

When buying policies, you might have questions along the way. For more information, check out our insurance section at Money Mash.

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