The Purpose of Life Insurance and Why You Need It

Elderly Parents Over 90 with Happy Faces

Happy Elderly Mother with Daughters!

Most people are familiar with the basic concept of life insurance and many have policies that are designed to protect their families financially in case the worst should occur. But what is the real purpose of life insurance and how does it change as people grow older?

Understanding the answer to this question will help you purchase the right type of policy for the needs of your family.

Protects the Breadwinner of the Family

For those who are young, getting life insurance may seem at first like an unnecessary expense. After all, statistics show that people who are in their 20s, 30s, or 40s are far less likely to pass away compared to those in their 60s, 70s, and so forth.

However, it cannot be predicted who will pass away unexpectedly and if you are the breadwinner of the household, your sudden death will have a considerable impact on the family in terms of their financial state.

A quick look at your expenses and the sudden loss of your income demonstrates just why life insurance is so important. Debt from the mortgage, auto loans, and even credit cards will be left to your spouse or those who depend on your support. Add to that the cost of the funeral which adds an additional burden and you can see why having life insurance is so important whether you are young or a senior.

For younger people, whole life or permanent policies make sense because the premium cost is considerably lower for those in their 20s, 30s, or 40s. Plus, the policy can also act as savings for retirement if it builds up a cash value.

However, term life insurance is also attractive for those on a tight budget or those who have other retirement savings in place.

Protection for Seniors

When the breadwinner has retired, the need for life insurance is still present, but the reasons change. This is because most seniors are living on a fixed income, their children are out of the home, their mortgages are paid off, and any outstanding debt is usually less compared to their younger counterparts.

This means that the financial impact of passing away creates different results and generally means that less coverage is required. The biggest financial burden becomes the funeral expenses and ensuring that the surviving spouse is taken care of during this trying time.

  • Funeral Expenses
  • Unpaid Debt
  • Uncertain Future

However, a life insurance policy can also be an opportunity to leave behind a legacy for their children or grandchildren to go to college or make a down payment on a home. In any event, seniors will usually face higher rates, so many will choose term life insurance as it is less expensive and better fits their specific needs.

By adjusting your life insurance needs based on your age and financial situation, you can choose the policy that is best for the needs of your family.