The essence of getting out of debt is to reduce all expenses to the bare minimum. The more money you have outgoing for things that aren’t 100% necessary, the less you will have to pay down your debt. And with debt comes interest so your expenses end up costing you more in the long run if you can’t manage your debt because of them.
Not all expenses are created equally, however. Sometimes you have to analyse exactly the type of expense it is to understand if there is a reason to take it on and put off your debt reduction for a bit. This is the case with life insurance. It seems like it’s an added expense every month that you may not need, but it isn’t so obvious.
In this article, we will go over what taking on life insurance means when you are trying to eliminate your debt.
You’re paying for protection
Life insurance is not like buying a new car with all the bells and whistles. What you’re paying for is not a typical expense. It is financial protection against future debt for your family in the event something happens to you.
In fact, whatever debt you have now may be passed off to your family if you were to die or be incapacitated. You have more reason to buy life insurance when you have debt than when you don’t specifically for this reason.
It may not cost as much as you think it does so for less than £100 per month. Just shop around for a quote from companies such as Stanmore that offer various types of insurance from life insurance to community group insurance and you’re sure to find a quote that is manageable.
It costs more the longer you wait
Since you are essentially betting on your own demise, it makes sense that you become a bigger liability as you age. You are more likely to die of disease the older you get. Which means that your life insurance policy will end up costing you more per month than if you buy it at a young age.
The cost increases at a rate of about 8% per year so the longer you put it off, the more expensive it will be for your future self. It can be more than double at the age of 45 than what you would pay at 25.
You can buy smaller policies
You don’t have to buy the biggest and most comprehensive policy out there. If you are in debt then you can manage your payments by buying a short policy that will help to cover any debt that you have now so it won’t be a burden on your family.
It can also be enough to not have them have to take on debt to go through their normal life when you’re not around to provide. You can then reevaluate your needs as these polices come to term so you can buy a better fit as you go forward all while managing your expenses.