There are a ton of reasons why you need buy life insurance and that the longer you wait the higher the financial risk for your family
In this post today I will go over a detailed list of why you need to buy life insurance and why you should stop procrastinating about protecting your family's future.
Why Buy Life Insurance?
I have learned that life insurance isn't for yourself, it is for the people you leave behind, this has inspired my list of 15 reasons why you need life insurance.
1. To Protect A Special Needs Child
I have a brother and sister that are both autistic and even though they are currently teenagers, they still require a ton of supervision and attention.
I love them with all of my heart but I know that when my father passes away they would be in a very bad position if he didn’t have life insurance.
They have to go to special schools and take extra classes and really need someone that can take responsibility for them around the clock.
I don’t know if we consider this enough but according to care.com a nanny that has a focus on special needs children could cost up to $20.00 per hour.
The math on this type of care for 1 year can bankrupt the average family if they needed full-time care.
To watch my brother and sister for let’s say 6 hours per day would cost:
- $600 Per Week
- $2,400 Per Month
- $28,000 Per Year
If you are the person primarily responsible for any special needs child, not having life insurance is irresponsible at best.
Leaving kids without any financial support that can’t fend for themselves is just wrong.
I made sure my brother and sister were covered if something happens to my father.
2. Paying Final Expenses
When you pass away there are going to be several final expenses that need to be paid.
The one that of course stands out the most is your burial.
While the SSA will pay out a $255 death benefit, it is about $9,700 short of what the average cost of a burial is in the U.S.
Below is a list of things that will need to be covered for your funeral:
As you can easily tell, this list starts to add up very fast and if you don't have life insurance your family might be having to run a GoFundMe campaign which isn't life insurance.
3. Cover Children’s Expenses - Day Care
According to Very Well Family the average cost of center-based daycare in the United States is $11,666 per year ($972 a month), but prices range from $3,582 to $18,773 a year ($300 to $1,564 monthly).
Paying upwards of $18,000 a year is extremely expensive and if you have more than one child the price doubles or triples.
It is important to make sure that you have enough life insurance in place if you have small children to make sure you can take care of their daycare expenses.
If you had to keep your child in day care until they were old enough to go to pre-school - usually around age 3, that would be anywhere from $10,000 up to $56,000 over that time span.
4. To Replace Your Spouse’s Income
One of the largest reasons to purchase life insurance is income replacement.
I usually suggest that families get at least 15 to 20X(times) their annual income in life insurance to make sure there is enough money to replace the lost income.
If your family is used to living on $75,000 and and that income goes away how long do you think they will be able to survive.
They could lose the home, have to move and change the kids schools, a ton of things can happen when income goes to $0.00 no matter what lifestyle you have.
It is essential to make sure you have enough coverage to replace your spouses income for a long period of time.
5. Cover Real Estate Investments
If you have real estate investments that your family is supported by, they will need life insurance to keep things running.
Imagine having multiple properties and they are unable to keep them up to code or pay the correct management company to keep the business going.
You could have several rents that are due on a monthly basis, maintenance fees, paying any employees and keeping landlord insurance policies active.
Having cash on hand to handle any unexpected issue with your real estate investments is smart and there is no better protection than life insurance.
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6. Pay Off Debts
If you are married or live in a community property state, your spouse is probably going to be responsible for your debt if you pass away.
Credit card bills, auto loans, the mortgage, business loans, you name it.
For this reason alone you need to have life insurance for yourself and your spouse.
Life insurance can quickly get rid of the debt and allow you to start over on a new financial journey.
7. It Can Be A Forced Savings Account - Return of Premium
The return of premium term life insurance policy gives you the best of both worlds.
It acts as both a life insurance policy and a savings account and while the premiums can be more expensive than your average term policy, they are much more affordable than whole life.
The way a return of premium policy works is that if you outlive your term policy it will pay back to you all the premiums you paid into the policy in a lump sum check.
If you pass away before the term ends, it will pay out 100% of the life insurance proceeds to your beneficiaries.
In essence, think of this as a forced savings account with a free life insurance policy attached.
8. To Buy a Business Partner’s Shares
Another solid reason to have life insurance is if you are a partner or key-person inside of a business.
You might not understand all the ways of financing or funding a business and if they pass away you want to be able to purchase their shares from the family members that might not want to be part of the business.
If you don't have those funds you would be stuck with partners that really can't help the business grow.
Also, if you invested into a small business with someone and they were the primary employee that would make everything run, you probably want coverage on them.
It's best to protect yourself and your business.
9. Because "People" Kill People
I am sure you have heard the old saying, "Guns don't kill people, people kill people."
Well that couldn't be more true now than ever, I just read a story that really upset me - I was really pissed.
An unknown group of cowards did a drive by shooting into the house of a single father who is raising 7 kids.
The shooting killed an 11 year old boy while he slept in his room with his other siblings.
It's some of the worst news I have heard this week so far, but there is probably worse news to come.
Unfortunately we live in a world where people can't seem to stop killing.
It's important to have coverage on everyone in your family.
10. College Planning
According to College Data the average cost of college is - $34,740 at private colleges, $9,970 for state residents at public colleges, and $25,620 for out-of-state residents attending public universities.
No matter what way your kids plan to go to college it will be a hefty cost behind it and if you want them in the best schools, they will need money available to attend college.
Having enough life insurance to cover a few years of college tuition for your kids is an essential part of planning out how much life insurance you need.
Why put your kids in a position of hoping to get scholarships or having to work through college to pay for school.
And we definately don't want them getting student loans.