Is Life Insurance Really Worth It?

Life insurance is often skimmed over or brushed aside because we don’t understand it or don’t see the need for it. Life is already so expensive, and life insurance sounds like a way for big corporates to make more money. So is life insurance something that’s worth spending on, or can you do without it? The truth is that for many people, life insurance is more than just useful – it’s critical.

Whether we like it or not, death is a certainty for all of us. If your death is early or unexpected, life insurance can help to fill the financial gap that gets left behind when someone passes. So is life insurance worth it for you?

If you have dependents, it’s worth it

If you have kids, it’s worth it to take out life insurance. The exception would be if you are so financially secure that if you were to pass away tomorrow, you could pay for their education and living expenses until adulthood from your savings alone. However, very few of us are lucky enough to be in such a strong position and if you were to pass away, you’d want to provide for your kids well after you’re gone.

Actually, if anyone relies on you financially, it’s worth it. It’s a given that you’d want to take out life insurance to protect your kids or spouses but with many families, financial responsibilities extend beyond the standard immediate family. Dependent parents, adult siblings who can’t provide for themselves, nieces and nephews, or even business partners are all people who may rely on you for financial help and who would struggle if you were to pass away.

If you have debts, it’s worth it

There are also instances in which life insurance is non-negotiable; when you’re taking out a bond for a house, for example.

But what about the costs? Should I invest instead?

Another thing that puts people off life insurance is the cost, but life insurance needn’t be a huge monthly payment. If you opt for life cover with no extra ‘bells and whistles’ such as investments, disability cover or the option to withdraw funds, your premiums can go down significantly and 500 000 cover could cost you as little as R150 per month. On top of that, there are plenty of ways to reduce the cost of your life insurance premiums; from taking a lower cover amount, to getting a policy while you’re young, to quitting smoking.

You should definitely be investing, but not at the expense of taking life insurance. Your life insurance is a form of financial protection rather than investment and is designed to give you peace of mind and provide for those you love. There are also some tax breaks on life insurance payouts.

When it isn’t worth it                           

Occasionally, there are situations where life insurance is no longer a worthwhile expense. Normally, this would be in the case of retirees who have no debts, no family that they’d like to leave any money to, and no desire to leave a lump sum to a charity or organisation. If you have paid off your house, car, and any other outstanding debt, that’s the first step. On top of that, if you truly have no need to pay off anything or provide for any loved ones (either because they are financially dependent or because you’d like to help them build a better life), then it may be that life insurance is no longer useful for you.

So, is life insurance worth it?

In short, yes. If anyone depends on you financially, you have any debts, or you want to leave behind something to provide for your loved ones beyond what they might expect, life insurance is a way to make that happen.

In rare cases, life insurance may not be needed anymore. However, think carefully before cancelling your life cover policy because taking it out at a later stage is likely to be more expensive and if you’re over a certain age or have had serious health problems, you may struggle to get cover at all.