5 Reasons to Get Life Insurance

Why get life insurance?

According to a recent NerdWallet study, the most common reason Americans buy life insurance is to cover final expenses. The second most commonly selected reason is to leave an inheritance, followed by covering large debts, replacing an income and building an investment.

1. Cover final expenses

The median cost of a funeral in 2023 was $8,300, according to the National Funeral Directors Association. A small permanent life insurance policy, such as whole life, can help your beneficiaries cover such costs after you die.

2. Leave an inheritance

Life insurance can be an effective way to pass on wealth. The death benefit goes directly to the beneficiaries listed on the policy. They can use the money for any purpose and typically don't have to pay income tax on the proceeds.

3. Cover large debt

In some cases, your debts can become the responsibility of others after you die. For example, co-signers on a loan are equally responsible for the debt. A life insurance payout can help them pay off the balance if you’re no longer around.

4. Replace your income

If other people rely on your income, your death could place a significant financial burden on their lives. The payout from a life insurance policy can help them cover living expenses in your absence.

5. Build an investment

Permanent life insurance policies typically include cash value that increases over time. A portion of your premium funds the cash value, and the money grows tax-deferred. You can withdraw or borrow against the value while you're still alive.

While all of the above reasons are valid, the main purpose of life insurance is to replace your income.

“Life insurance offers peace of mind for you and helps to ease the financial burden on your family if you die prematurely. Your loved ones will be able to cover everyday living expenses.

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