7 reasons to buy life insurance

7 reasons to buy life insurance now
By Michael Estrin • Bankrate.com

Insurance » Life Insurance »

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Chances are you lack life insurance
Being a responsible adult means making sure loved ones who depend on you are financially safeguarded if you unexpectedly leave them behind. The way you provide that protection is with life insurance.

But a frightening reality persists. Three out of 10 Americans don't feel they have enough life insurance coverage, according to LIMRA, a financial services research and consulting firm.

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"Twenty-somethings won't buy life insurance because they feel invincible," says Brian Frederick, a CFP professional with Intrinsic Wealth Counsel in Tempe, Arizona. "At the other end of the spectrum, folks 50 or older have a hard time buying coverage, either because it's become more expensive or they have a hard time qualifying, medically."

The real "sweet spot" for buying coverage is in your 30s or 40s, when you qualify for good rates, he says.

However, a New York Life survey found that the gap between the life insurance Americans have and the coverage they need increased 11 percent in six years.

Is your life insurance lacking? Probably, and here are seven reasons why.


Work coverage is likely insufficient
While health insurance is a common employee benefit, it's not unusual to get life insurance at work, too.

The U.S. Bureau of Labor Statistics reports that three-quarters of full-time civilian workers are offered life insurance by their employers. The overwhelming majority of them take advantage of the benefit.

However, that work coverage usually isn't adequate, Frederick says.

"Most employers give employees coverage equal to one to two times their annual salaries," he says. "While this might be enough for someone who is single with no dependents, if you have a mortgage, young children or a nonworking spouse, you'll need more than that."

A common rule of thumb is that life insurance should provide seven to 10 times the insured person's annual salary.

"But that's just a starting point," says Frederick. "From there, you need to get a full financial picture so you can dial in the right amount of coverage."

Frederick looks at a variety of factors, including a client's income, assets, liabilities and -- perhaps most difficult to predict -- plans for the future, such as for having additional children, or for retirement.


Coverage isn't as expensive as you think
If you think you can't afford life insurance, you might be wrong. A study from LIMRA and the nonprofit insurance education group Life Happens found that 80 percent of consumers have the wrong idea about what life insurance costs. Millennials, for example, believe life insurance policies are more than three times more expensive than they actually are.

In fact, premiums for life insurance are typically lower than for other forms of insurance and are often less expensive than monthly bills for cable or cellphones.

"A large majority of term policies written have premiums of under $100 per month, and for some people it's even possible to buy adequate coverage for under $50 a month," says Frederick.

Of course, the prices do vary based on age, gender and health factors.