Is life insurance worth it?

Life insurance can be a beneficial and cost-effective way to provide financial protection for your loved ones following your death. 

In exchange for a monthly or annual payment to a life insurance provider, your beneficiaries receive a pre-determined sum of money after you have died. The amount of money can range from tens of thousands of dollars to millions, depending on a series of factors.

The benefits of having a life insurance policy are multiple - but is it worth it? Or will you just wind up voluntarily paying for something you never wind up using?

If you're in the market for life insurance, or just want to increase the protection you already have, it helps to speak to a professional. They can answer your questions and provide a quote so you know what to expect. 

Here are three items to consider when trying to gauge whether life insurance is worth the price tag.

Your dependents

Many people are interdependent. If you're married, have school-age children, have a mortgage or are generally relied on financially you should consider life insurance. Think about the bills and expenses you have and the money you make. Now take yourself out of the equation. If there are no alternative ways for your dependents to make ends meet in your absence then you would benefit from having a life insurance policy.

It's easy to get started. Multiple providers can answer your questions, provide information and help you find the best policy for your needs.

However, if you're single and living alone with no spouse or children? Then you probably don't need life insurance. Life insurance is generally beneficial to fill the economic gaps caused by someone's death. If you are not financially supporting/assisting anyone besides yourself then the cost of paying for life insurance may not be worth it.

Your financial situation

For most people, finances are tied to their careers, their investments and the equity they may have in their homes. Many Americans do not have the equivalent amount a life insurance policy provides stashed away in a savings account. For these people (the vast majority of American adults) a life insurance policy makes sense. They may risk never using it but the disadvantages of not having one usually outweigh the relatively inexpensive costs of purchasing and keeping a policy.

What if people are dependent on you but you already have a substantial amount of money to leave them should you die? Perhaps you've inherited a significant sum or are considerably well off financially. Then you probably can afford to skip life insurance.

Your age

If you're young with a new family you'll want life insurance to protect you. If you have years (if not decades) of career earnings in front of you then life insurance makes sense. You need time to build up savings, investments and equity in your property. If your life and earning ability ends prematurely then life insurance can adequately fill the gap.

Older people, however, may not benefit as much from taking out a life insurance policy. They're likely to be more financially secure and have fewer people depending on them. And, should they die, they generally won't leave family members as financially vulnerable as a younger person would. Finally, the older you are the more expensive life insurance becomes. That's why it makes sense to start with a policy as soon as possible. 

How to determine if you need life insurance

There are a variety of factors that can help you determine when you need life insurance, how much you need and how much you should pay. Ultimately, the final decision is yours based on your personal financial situation and preferences. 

Many financial advisers recommend having at least some form of life insurance. If you don't have life insurance or want to overhaul what you do have, now is a good time to act. Reach out to a life insurance representative who can help set up a plan that protects you and your family.