Did you know that a 2020 LIMRA Barometer study found that 50% of millennials believed the estimated cost of a $250k life insurance policy for a 30-year old man to be $1,000/year (spoiler: it’s more like $160/year). The gap between what people perceive life insurance to be and the reality is still present. One reason that gap may still exist is because people aren’t entirely aware of all the benefits that term life insurance can provide for them.
For example, budget-friendly costs are great, don’t get us wrong. But there’s a lot of other term life insurance benefits to think about. That’s why we’ve collected our top 5 benefits of life insurance that we think consumers like you should think about when looking to buy a policy. We’re breaking down the benefits, how they can relate to you and your needs, the future and what sort of benefits you can even find with a Wysh term life insurance policy.
The Wysh Blog
- What are the benefits of life insurance?
- Living benefits of life insurance—budget-friendly costs
- Life insurance death benefits—tackle final expenses
- Addressing your debts
- Are life insurance benefits taxable?
- Other living benefits of life insurance to keep in mind
- Benefits of Wysh Life Insurance
What are the benefits of life insurance?
As of 2022, 50% of Americans own a life insurance policy of some sort. That means large amounts of the US population are either uninsured or underinsured. The 2022 LIMRA Barometer Study cited that 10% of households say they’d face financial hardships within a week of losing their primary breadwinner. Meanwhile 45% say it would take six months. That’s not a lot of time.
Ultimately, term life insurance is about providing you and your loved ones with peace of mind. That peace of mind is crafted from all the benefits, the pros, of term life insurance. But what are the benefits of life insurance?
These categories encompass some of the most common concerns that people have about their finances. Whether that’s their family, their home, their job or all of the above, protecting your loved ones isn’t just a financial consideration, but an emotional one as well. It’s as much about your connection with each other and protecting one another, even if we can’t be there physically.
Living benefits of life insurance—budget-friendly costs
One of the living benefits of life insurance is that term life plans can often be more budget-friendly than other permanent policy types, such as whole life insurance. A 20-year term life policy with coverage of $1 million for a 30-year old man could have an average yearly premium of $280. Compared to whole life, where the same coverage and age could net an average yearly premium of $7,953! That’s a sizable difference.
Break that average cost down over a year, that’s a monthly premium cost of $23. Some may have more costs and some may have less. Often it can come down to the company you’re applying with. Make sure you shop around to determine your best cost-for-coverage. But budget-friendly protection is definitely a benefit to consider.
One of the life insurance living benefits is that protection can fit your financial needs. Term life insurance typically has policies that last for 10, 20, or 30 years. That way, you can ensure you’re covered for just the time you need; nothing more, nothing less. You want to cover your kids until they’re more financially independent? A 20-year policy term might be best for you as you cover not just childcare or grade school, but possibly college and a few years after that. Want to cover your mortgage? Go up to 30-years so that the entirety of your mortgage is covered. A term life policy can fit to meet your specific protection needs.
Other policy types, such as whole or universal, are permanent (unless you stop paying premiums). But with more permanent policy types, the immediacy of financial protection gives way to a more investment-minded function. That’s fine for some folks. But not everyone wants or needs coverage for that long. If you’re looking for more short-term protection, then term life could benefit your needs.
Life insurance death benefits—tackle final expenses
Term life insurance death benefits can go a long way in ensuring that any final costs don’t hurt your family’s finances. The national median cost of a funeral with viewing and burial in 2021 was $7,848. That includes service fees ($2,300), removal & transfer of the body ($350), embalming ($775), the hearse ($350), metal casket ($2,500) as well as other additional costs (???). Even if you skip the traditional funeral, other methods can be just as costly. The median cost of a cremation in 2021 was $6,971 (urn not included).
A term life policy can help tackle any final expenses facing your loved ones. In fact, according to the 2020 LIMRA Barometer study, 84% of policyholders cited paying off final expenses as a reason for owning a policy. So don’t let your loved one’s goodbye possibly turn into a drawn-out financial situation.
Address your debts
Whether it’s because those left behind are co-signers or you live in a community property state, debts can sometimes seep back to your family and stick around. You aren’t required to pay back all kinds. Credit card debt, for example, doesn’t transfer to the family of the deceased to be paid off.
But other debts, such as some medical debts, student loans and mortgages can be transferred to surviving family members. If you have debt (like oh so many of us), there’s a chance your loved ones may be on the hook to repay. A solid term life insurance policy, however, can take the stress out of worrying about leftover debts. Loss is tragic and it can be a lot for even the most comfortable of families. The right coverage can make sure your family doesn’t have to worry about the wrong stuff.
Are life insurance benefits taxable?
One of the less discussed benefits of life insurance that’s no less important. According to a Forbes Advisor survey, 22% of Black respondents said that they value life insurance as a way to pass along generational wealth. There’s definitely a number of ways that term life insurance benefits can be used to leave a legacy.
But wait, aren’t life insurance benefits taxable? Generally, death benefits from a policy aren’t included in gross income, which means you don’t have to report them. Which means you don’t have to pay taxes on them. Cha-ching. That being said, there are instances where you may have to report interest you receive.
Morbid jokes aside, a term life policy can be a great way to not only address debts, expenses and other financial obligations, it can be a way to leave our loved ones with a truly wonderful gift. A benefit of term life insurance is that it can do more than just help with debts; it can help set your family up for even greater future success.
Other living benefits of life insurance to keep in mind
Term life insurance isn’t just good for the benefits above. There’s a whole host of benefits that come with having a term life insurance policy. For example, a policy’s coverage could go to replacing or supplementing a loved one’s income. That could mean your spouse (or roommate) doesn’t have to also worry about the rent should something happen to you. That could mean childcare costs. Just because you’re gone doesn’t mean you can’t still financially support the people closest to you.
There’s also the fact that term life insurance can be more simple than other types. There’s no cash-value component to consider, which means term life is an insurance product, not an investment. So if you feel other policy types are too complicated, but you still want coverage, term life may be perfect for you.
Benefits of Wysh Life Insurance
There’s an additional set of benefits that aren’t applicable to all insurance companies. Take our free Wysh Builder tool, for example. It’s a hands-on and stress-free way to start thinking about not just your potential policy, but you and your family’s future financial needs. Would you want to protect your kids’ education more or your mortgage? Cover the rent or student loans? Your needs are unique to you. Your term life policy should reflect that.
Wysh policies are flexible, meaning you can update your coverage amount as your needs change. If you think you’re going to need more coverage, you can do just that. The important thing is to find the coverage that is right for you. Head on over to our free Wysh Builder tool now and start building your perfect policy.
- The top five benefits of term life insurance are: budget-friendly costs, the short-term protection, the ability to tackle final expenses and address debts, and the ability to leave a non-taxable inheritance.
- Term life insurance policies are typically more budget-friendly than other policy types.
- 84% of policyholders cited paying off final expenses as a reason for owning a policy.
- The median cost of a US funeral in 2021 was $7,848 and the median cost for a cremation in 2021 was $6,971.
- Not all debts disappear after someone dies. Debts like student loans, some medical debts and debts in community property states can be transferred to surviving family members and/or other co-signers.
- Life insurance death benefits are generally not considered gross income, meaning you don’t have to pay taxes on them.
- Additional benefits include income replacement or supplement, simplicity, and flexibility.