The Cost of Not Having Life Insurance

From covering the cost of funeral and burial services to contributing to your child’s college fund in your absence, the protections life insurance provides for your family are far-reaching. Without it, you risk leaving your loved ones with significant financial challenges.

Plus, the earlier you start thinking about life insurance, the less you can expect to pay. Below, we’ll explore what life insurance is, the best time to purchase it and the cost of not having a life insurance policy.

What Is Life Insurance?

Life insurance is a type of coverage that protects your loved ones from the costs associated with your death. It can also help fill the financial gap left when your income is no longer available. Life insurance is a key aspect of retirement planning that’s often overlooked.

Over half of Americans believe life insurance costs more than they can afford, according to LIMRA, but often, this isn’t the case.

The Cost of Not Having Life Insurance

From funeral arrangements to unpaid debts and end-of-life care, the unfortunate reality is that there are often significant costs when a person passes. Life insurance can help alleviate this burden for loved ones. Here’s a breakdown of the cost of not having coverage.

Funeral and Burial Costs

The cost of cremations, burials and services is often significant — the average funeral with a burial or cremation is $7,848, according to the latest stats from the National Funeral Directors Association. Choose to be buried in a different state, and this can increase even more.

Life insurance can relieve this financial burden. In some instances, it can even help cover the cost of travel expenses so your out-of-state loved ones can say goodbye. If your family can’t afford to cover the cost of a funeral, a coroner may perform a cremation without holding a family service.

Unpaid Loans

Without life insurance, the burden of mortgage debts, car loans or unpaid student loans may fall on your loved ones. With car loans alone averaging between $26,000 and $50,000, according to Consumer Reports, this cost can be significant.

End of Life Care

In some cases, end-of-life care may be necessary. Without life insurance, your loved ones may be responsible for any outstanding costs.

Family Members Dependent on Your Income

Without your income, your family may not be able to continue living in the family home. Stay-at-home partners should not underestimate their monetary value, either. In your absence, additional child care, cleaning or meal preparation services may be necessary. Life insurance can help cover the cost of these essential services, relieving your family of financial stress.

Children’s Education

In the event of your passing, you may not be able to accumulate the savings you’d planned for your child’s education. In your absence, life insurance benefits can help fund their education.

When Should You Consider Life Insurance?

The cost of not having insurance is significant. But is life insurance for everyone? And when is the best time to buy? We’ll dive into these questions below.

When You’re Young

Young people need life insurance, too — in fact, it’s often the best time to buy. For a healthy, 20-year-old nonsmoker, life insurance averages only $14.75 per month. After this, premiums increase an average of 8% to 10% per year. Plus, the younger you are, the easier your approvals will be.

You Have Debt

It’s not unusual to pass away with unpaid debt. With Gen Z’s total debt averaging $30,000, this is unlikely to change. To avoid passing debt to your loved ones, consider a life insurance policy.

Others are Dependent on Your Income

If your income suddenly disappeared tomorrow, could your family afford to stay in your current home? Or would your spouse be able to retire as planned if you were no longer in the picture? In some cases, your income may be essential to keep your family afloat.

You’re Not Self-Insured

Some people may choose self-insurance, meaning they save money to protect their family after they pass. If this doesn’t apply to you, life insurance is likely your best option.

Facing up to the reality of life after we’re gone can be overwhelming. But failing to plan for your family’s future can put them at a major financial disadvantage.

Fortunately, once you’ve purchased a life insurance policy, you can rest assured knowing your family will be protected. Purchase life insurance when you’re young, and your policy may even cost less than your favorite streaming service.

Be sure to reassess your policy if and when you incur new debt. This will help ensure adequate coverage in the event your policy goes into effect.

Learn more about getting a life insurance policy through AAA.

The Cost of Not Having Life Insurance

What Is Life Insurance?