Is Life Insurance a Must?

With an estimated 53 percent of Americans having coverage as of 2020, a life insurance policy can offer you peace of mind that your loved ones will have financial security, with funds to cover key expenses after you pass away. However, you might wonder if you really need this form of financial protection, especially if you're young and don't have a lot of outstanding debt or dependents.

Whether you should get life insurance and how much life insurance you need will depend on your unique situation and preferences. Here's what you need to know about how life insurance works, why you might want it and how you can find the right type of policy.

While you have different types of life insurance to choose from, your coverage serves to provide a specific death benefit amount upon your passing to one or more beneficiaries you designate. You'll select the coverage amount when you take out the policy and possibly add some riders that add extra features.

As the policyholder, you'll make monthly or annual insurance premium payments to keep the policy active. Your beneficiaries will file a claim to receive the payout of funds upon your death, but some policies also have living benefits where you can borrow or cash out a portion of the value during your lifetime.

If you don't have life insurance, your loved ones would have to tap into your assets and may not receive the inheritance you wanted them to have.

You'll find that life insurance comes in two main forms: term life insurance and whole life insurance. When you choose a term life insurance policy, you will only have benefits for the length of the chosen term, usually ​up to 30 years​, and you may renew your coverage for another term if desired.

Whole life insurance policies come in a few varieties, have the main feature where the policy lasts for the remainder of your life and more often have a cash value you can tap into earlier. Further, whole life options such as adjustable life and variable life come with features that can make it easier to boost your death benefit after you take the policy out.

​Consider also:​ What Is Whole Life Insurance?

The main reason to consider a life insurance policy is for your beneficiary to receive funds to pay for final expenses such as funeral expenses and leftover debt such as mortgages, credit card bills and private student loans for the education of family members. If you don't have life insurance, your loved ones would have to tap into your assets and may not receive the inheritance you wanted them to have.

At the same time, you might consider life insurance to provide extra money to leave behind for your loved ones to use as they wish or to help replace lost income. Someone without a spouse or children might still get a policy so they can have the funds donated to charity in their memory.

With the benefits of life insurance in mind, you can decide whether this financial product would benefit you and your family, as well as what amount of coverage is needed.

For example, if you have significant savings, are single without dependents and have minimal debt, you might opt to wait and consider life insurance coverage later, but you should keep in mind that the cost will go up with age.

However, you might decide to get coverage right now if you have a family who would need the funds to pay for your final expenses as well as help replace the income to pay living expenses that would be lost with your death; you might do the same to simply have peace of mind as your personal finances could change in the future.

You can use a life insurance calculator to estimate the policy amount you need for your financial situation. You'll want to have a list of your current liabilities, your annual income along with the number of years that amount would be needed, estimated final expenses, current assets and other planned expenses like an inheritance or college tuition for children.

Consider also: What Is Net Cash Value in Life Insurance?

To get life insurance quotes, you can reach out to a life insurance company like GEICO directly or use a quote aggregator like SelectQuote or PolicyGenius. Along with stating whether you want term or whole life coverage, you can expect to answer some lifestyle and health-related questions so that the insurer can assess your risk. You'll also provide other personal and financial information.

When you're buying life insurance, the insurer will request a basic medical exam that you'll need to complete as a term for qualifying for a life insurance policy. However, you can also find exam-free options, especially if you just seek term coverage.

​Consider also​: Is Your Benefit Plan Life Insurance Enough?