Top 8 Reasons People Buy Life Insurance

Have you ever wondered why some people purchase life insurance and some people don’t?  I have been studying this unique topic for several years now.  After spending years in the field as a life insurance producer and several more as a life insurance manager, I decided to compile my top 8 reasons people purchase life insurance.

It really is quite interesting when discussing life insurance needs with people.  Keep in mind that these top 8 reasons people purchase life insurance is based on distinct differences from family to family.  There is no set blueprint as to why one family or individual invests in life insurance and the other does not.  Each decision is purely distinct to that individual, but these top 8 reasons are constantly recurring.

So here goes:

#1.  Piece of mind.  Simply knowing that your loved ones, spouse, family members will not have to worry about financial issues when you are no longer around.  Piece of mind is probably the #1 reason people purchase life insurance.  Simply put, they love their family.

#2.  Protect certain assets.  Another great reason is to protect certain assets.  Specifically to protect a mortgage.  There are thousands of insurance companies today that market their product specifically to mortgagelifeinsmortgage or home owners.  Generally, the way this product works is that if the mortgage holder dies, the insurance will be adequate to pay off the mortgage and the family can continue to live in the household.

#3.  Pay funeral expenses.  On the other hand, there are thousands of companies today that specialize in ‘final expense protection’.  This is generally a whole life insurance policy in the $10-$20,000 dollar range, designed to be adequate for funeral expenses.

#4.  Employer does not provide benefits.  Another reason people purchase life insurance is if the employer does not provide any type of benefit.  Also, self-employed professionals, such as hairdressers, lawyers, dentists, doctors, landscapers, roofers, etc. do not have access to employer provided benefits and have to fend for themselves.  

#5.  Investment.  Although life insurance is generally not thought of as a great financial investment, some would argue that it’s an investment their family can’t live without.  Keeping in mind that each and every family has different needs and different financial obligations, life insurance for the majority of families is a basic necessity.

#6.  Tax advantages.  As life insurance proceeds are tax-free generally (direct bank account drafts are usually after-tax money), one can create a significant tax-free estate simply by purchasing a life insurance policy.  This may vary for the small business owner or if the premium is tax-deductible.  Please consult your tax advisor for more information.

#7.  Responsibility.  Another significant reason people purchase life insurance is a desire to be responsible.  I hear over and over that ‘I don’t want to be a burden for my family’.

#8.  Income replacement.  In the event of the death of the family bread winner, life insurance can serve to replace the income of the deceased.  Depending on the face value of the life insurance policy, the income of the deceased can be replaced for several years or at least during the grieving process.  For example, a deceased policyholder who earns $50,000, the income can be replaced with a $250,000 life insurance policy for approximately 5 years.

These 8 reasons are based on my personal experience after several years as a life insurance producer and manager.  

For more information or a free in-home life insurance consult, please call me anytime at 804-201-3866.


Chris Ford

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