Reasons to buy insurance are different for everyone. But the decision to purchase insurance is, at its core, all about providing financial security for yourself and the ones you care about. Learn why life insurance is important, and who needs it.
Why is life insurance important?
Buyinglife insuranceprotects your spouse and children from the potentially devastating financial losses that could result if something happened to you. It provides financial security, helps to pay off debts, helps to pay living expenses, and helps to pay any medical or final expenses.
Life insurance provides cash when you need it most.
Your life insurance policy can deliver a specified sum of money when you need it. Upon your death, your family will receive your policy payout immediately. And that death benefit is generally not subject to federal income taxes. For example, a $500,000 policy provides $500,000 in death benefit proceeds directly to your beneficiary.
Steps in the insurance buying process:
- Determine your goals, determine how much insurance you need to meet your goals over time, and determine what you can afford to pay.
- Learn what types of insurance can help you meet your needs.
- After considering initial premium payments, any possible increases in premiums over time, any additional death benefits,1and any living benefits2that can be utilized before you die, choose the type of insurance policy (or combination of types) that best meets your needs.
Remember, working with a financial professional can help make this whole process easier. A financial professional can help explain the differences between types of policies, help you calculate the amount you need, and present potential options that may best suit your needs.
6 reasons to buy life insurance.
Life insurance can give you lasting peace of mind in terms of the assurance that you have provided a legacy. That’s because the right coverage can offer a valuable combination of benefits, many guaranteed by the claims-paying ability of New York Life—so that you and your loved ones know exactly what you’re getting.3Of course, you have to make a long-term commitment to paying premiums and keeping the policy in force. Some of the most common reasons for buying life insurance include:
1. Guaranteed protection
If you have a family, a business, or others who depend on you, the life insurance benefit of a whole life policy acts as a financial safety net. When you die, your beneficiaries will receive a lump-sum payment that is guaranteed to be paid in full (provided all premiums are paid and there are no outstanding loans). It’s essential protection that you can count on to be there for your loved ones when needed.
2. Income replacement
Imagine what would happen to your family if the income you provide suddenly disappeared. With whole life insurance, you can help make sure that your loved ones have the money they need to help:
- Pay the mortgage
- Afford childcare, health care, or other services
- Cover tuition or other college expenses
- Eliminate household debt
- Preserve a family business
3.Tax-free benefit
Your beneficiaries will be able to enjoy every penny you leave them. That’s because the benefit of a life insurance policy is generally passed along federal income tax free.
4. Guaranteed cash value growth
As you pay your premiums, your Whole Life policy builds cash value that is guaranteed to grow—tax deferred—and can help meet a variety of financial goals:
- Supplement retirement income
- Fund a child or grandchild’s education
- Pay off a mortgage
- Protect existing assets
- Establish an emergency fund
5. Dividend potential
One of the benefits of purchasing whole life insurance from New York Life is that you will be eligible to receive dividends.4Although they are not guaranteed, when dividends are awarded, you can take them in cash, use them to offset your premiums, or use them to buy paid-up additional insurance that increases your coverage and cash value, use them to offset your premiums, or take them in cash.
6. Optional riders
There are several ways to tailor a whole life policy to meet your individual needs. For an additional cost, you can use riders to purchase additional protection without further underwriting, to pay your premiums if you become disabled, to use some of your face amount to pay for chronic illnesses, or to purchase coverage for your children. Your agent can help you decide if any of these riders are right for you.
1The life insurance death benefit is the amount that is paid when the policy is in effect and the insured dies. The insured is the person whose life is covered under the policy. Accessing the cash value of a Whole Life policy for special expenditures will reduce the available cash surrender value and the death benefit.
2A living benefit is any benefit the policy owner can access while the insured is still living. Not all life insurance policies are designed to offer living benefits.
3All guarantees are based on the claims-paying ability of the issuer
4While dividends are not guaranteed, eligible policy owners have received them for more than 160 years. Some policies are participating but are not expected to receive dividends.
Oregon Policy Form Numbers for New York Life Whole Life:New York Life Insurance Company is the issuer of New York Life Whole Life. In Oregon, the Whole Life policy form number is ICC18217-50P (4/18). SMRU # 1891275
FAQs
Life insurance provides a financial safety net to your beneficiaries, business, or estate after you pass away, so it can be a good investment if you have a lot of expenses or obligations.
Why would a person need life insurance? ›
Life insurance is there to help your loved ones with financial needs if you aren't there anymore. Consider your mortgage and other debts, how much income would need to be replaced, money to cover a funeral, and college for the kids. Add those up, and you'll have a good idea of how much insurance you'll need.
What is the main purpose for buying life insurance? ›
The goal of life insurance is to provide a measure of financial security for your family after you die. A life insurance policy will help them meet the financial needs that your income would have normally covered. Life insurance can be purchased on an individual or group basis.
How do you decide if you even need life insurance? ›
The quickest way to know whether you need life insurance is to ask yourself one question: Would your death have a financial impact on the people in your life? If the answer is yes, then you may want to consider life insurance. Life insurance is a contract between you and an insurance company.
Is getting a life insurance worth it? ›
Life insurance can be a valuable investment, as a policy can help financially support your loved ones after your death. It can also help cover large debts, like a mortgage or student loans, rather than leaving your family responsible after you die.
Is it OK to not have life insurance? ›
Not everyone needs life insurance. People who've accumulated enough wealth to cover their final expenses and who don't have dependents can usually forgo paying for life insurance.
Who doesn't need life insurance? ›
If you have enough savings to support all the people who depend on you and cover all your monetary commitments, you may not require life insurance for income replacement if you pass away.
What is the cash value of a $100,000 life insurance policy? ›
However, most people receive around 20% of the face value on average, according to LISA. So, if we're using that 20% average to calculate the cash value of a $100,000 life insurance policy, the cash value of the policy would be $20,000.
What are 3 things you need to consider when buying life insurance? ›
Calculate how much life insurance coverage you need. Decide on your financial goals for your life insurance. Determine what type of life insurance best meets your financial needs.
At what age does life insurance not make sense? ›
You may no longer need life insurance once you've hit your 60s or 70s. If you're living on a fixed income, cutting the expense could give your budget some breathing room. Make sure to discuss your needs with an insurance agent or a financial advisor before making any major moves.
Generally, you need life insurance if other people depend on your income or if you have debt that will carry on after your death. However, the older you get, the more expensive life insurance becomes.
What happens if you never use your life insurance? ›
Your coverage ends if you outlive your term life policy. If you still need life insurance after the term expires, you can choose to convert your policy to permanent insurance, buy a new policy, or go without coverage.
Do life insurance actually pay out? ›
The payout from a life insurance policy is called a death benefit and it is distributed to the beneficiary of the policyholder. Permanent or whole life insurance pays out in full when the policyholder passes away, while term life insurance pays out if death occurs during the policy's specified term.
Can you cash out life insurance? ›
Some policies will have a surrender fee in the case of cashing out an entire policy, while others may charge fees for partial surrenders. Other than that, there are no additional penalties or fees. The surrender fee is usually 10% to 20% but it can be as high as 35% to 40%. Check your policy contract.
When to drop life insurance? ›
If you're experiencing financial difficulties or your life insurance policy has fulfilled its primary need to protect you when you need it most, such as protecting your mortgage payments until you pay off your home, you may find that ending your policy is the best course of action.
When would you need to use life insurance? ›
Generally, you need life insurance if other people depend on your income or if you have debt that will carry on after your death. However, the older you get, the more expensive life insurance becomes.
Who would need life insurance? ›
Everyone has different needs and considerations when it comes to deciding whether or not they need life insurance. In general, life insurance could be beneficial for small business owners, parents with jobs, stay-at-home parents, retirees, single people without children and empty nesters.
Why would someone want to take out a life insurance policy? ›
Life insurance benefits can help replace your income if you pass away. This means your beneficiaries could use the money to help cover essential expenses, such as paying a mortgage or college tuition for your children. It can also be used to pay off debt, such as credit card bills or an outstanding car loan.
Do I need life insurance if I have no debt? ›
In almost all cases, you probably do need life insurance. Other than those rare and awesome situations where someone has finished off the Baby Steps and become both debt-free and self-insured, most people need to have a life insurance policy in place.
