Life insurance. It’s not exactly your best conversation starter at parties. We know a lot of people don’t understand it and avoid it. The truth is, life insurance can potentially help both you and your family.
First, let’s give you the quick 411 on what life insurance is. It’s a contract between you and an insurance company. You make regular payments in return for a sum of money (a death benefit) to be paid to a designated beneficiary, such as a spouse or family member, when you pass away. This money can help your family cover expenses or needs after you’re gone.
But did you know that some life insurance policies have cash value you can use while you’re alive to cover emergencies? Some insurance policies have optional riders, which typically have an associated fee. Riders are a feature that can provide several kinds of insurance protection if certain conditions are met. For example, they may help you pay for medical bills if you develop a qualifying illness and submit a claim to the insurance company. Selecting the right kind of policy is important, as chronic illnesses are one of the top reasons healthcare costs are rising.1
If you’re a woman, you may think you don’t need it. Fewer women than men have life insurance policies.2 But the truth is, women may need it even more than men do. Here are some of the reasons why:
Protecting your family
If you’re married with children, life insurance can help protect your family if something happens to you — whether or not you’re the family’s primary breadwinner. It may help cover outstanding debt, funeral expenses, and help with the family’s financial needs, since they’ll not just lose you, but also your income. Your policy proceeds can help your beneficiaries maintain their quality of life and help cover other needs such as college tuition or a spouse’s retirement.
If you think you don’t need life insurance because you don’t have a spouse and kids, think again. Life insurance can help cover funeral expenses so they don’t fall on other family members such as parents or siblings.
Women often find themselves taking on caregiver duties. If you’re caring for a family member, such as an elderly parent, life insurance can ensure they can continue receiving the care they need if you assign them as a beneficiary to your policy. That way, they have the financial support to hire a professional to take over caregiving needs if something happens to you.
Who will care for you?
Most people think of others when taking out a life insurance policy. If you don’t have any family nearby, who will help take care of you if you’re diagnosed with a chronic illness? Optional riders are available on certain life insurance policies to add extra coverage for exactly that situation. The money can be used to help cover medical bills, caregivers, and living expenses.
The need for cash
Life is full of unexpected events that require money, and sometimes, lots of it. Some life insurance policies build cash value that can be borrowed against (if you’ve accumulated a sufficient amount) if you get in a pinch. This money can be used to help your family, for your own needs, or to reach a goal such as starting a new business. Just keep in mind that “borrow” is the key term here. It’s a loan, so it needs to be paid back or it will reduce the policy’s face value amount. It's also a good idea to find out what fees and charges could be applicable when taking a loan out against your policy. You may want to consult with a tax advisor or other professional, as there may be tax implications as well.
A long life
Women generally live longer than men,3 so they can have a greater likelihood of medical needs. Having a policy that accumulates cash value or has a rider for a chronic illness may provide financial support to cover medical care, especially if you’re the sole survivor of your family. And here’s a bonus, since women tend to live longer, your life insurance may be more affordable than it is for your male counterparts.
Many women mistakenly believe if they’re not bringing an income in, no income would be missed if they should pass away. But think about the many valuable duties stay-at-home moms perform — child care, housework, errands, transportation for the kids, meal preparation. Who will do that if you’re gone? Your family may need to hire help and life insurance proceeds may give them the financial support to help continue the lifestyle they’re accustomed to.
There are several types of life insurance to choose from — some are for a set time frame, others are for life, and there are various optional riders to customize your policy with, too. To learn more about the different types of insurance, and which might be right for you, see our previous blog.
Then talk to your financial professional or life insurance agent about what fits best with your needs.
Things to Consider
- While life insurance may not be fun to think about, it can be important to help maintain you and your family’s quality of life.
- Life insurance could provide cash value during your lifetime to help with emergencies, or if you should get ill.
- Women may need to consider life insurance more than men to help support longer life spans.
1 “Why Do Healthcare Costs Keep Rising?” Investopedia, October 2019
2 “5 Reasons Women Need Life Insurance More Than Men Do,” MSN, November 2018
3 “Women Need to Take an Active Role in their Financial Lives,” CNBC, April 2018
Neither Transamerica nor its agents or representatives may provide tax, investment or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.
Loans, withdrawals, and death benefit accelerations will reduce the policy value and the death benefit and may increase lapse risk. Policy loans are tax-free provided the policy remains in force. If the policy is surrendered or lapses, the amount of the policy loan will be considered a distribution from the policy and will be taxable to the extent that such loan plus other distributions at that time exceed the policy basis.
Benefits provided through the critical, chronic and terminal illness accelerated death benefit riders are subject to certain limitations and exclusions. The actual benefit paid to the policy owner will be less than the amount that is accelerated because the amount is discounted to reflect early payment of the policy’s death benefit. Administrative fees per request apply. Amounts payable under the critical and chronic illness riders vary based in part on the nature and severity of the Insured’s health condition and the Insured’s remaining life expectancy at the time of the acceleration as determined by the company. Riders should not be the sole basis to purchase any life insurance policy. Benefits paid under accelerated death benefit riders, including the long term care rider, will reduce the life insurance policy’s death benefit and policy value. Consideration should be given to whether life insurance needs would still be met if rider benefits are paid out in full.