Life insurance isn't just a safety net - it's a proactive step you can take to ensure your loved ones' financial stability in the event of the unexpected. If you want to gain a better understanding of the ins and outs of life insurance, read on for some essential facts.
What is life insurance?
To put it simply, life insurance provides a designated beneficiary a sum of money upon your death. Like other types of insurance, life insurance is a contract between you and an insurance company, where you make premium payments in exchange for coverage. People often buy life insurance to:
Provide financial security to their loved ones
Have funds to pay for funeral expenses
Cover outstanding debt repayments
10 facts to know about life insurance
1. Only half of Americans have life insurance.
Recent studies estimate 51% of Americans have life insurance — leaving nearly half of the country unprotected. Coverage varies by age, with Gen Z and Millennials least likely to have life insurance.
2. Life insurance is (probably) cheaper than you think.
One of the persistent myths about life insurance is that it’s cost-prohibitive. In reality, the average cost of life insurance is $26 per month. Generally, younger people pay less for life insurance.
3. You can apply for life insurance online now.
Some people have access to life insurance through their employer. You can also easily apply for coverage online. We’ve teamed up with Ladder to make the application process quick and painless — applying for life insurance through Ladder takes as little as 5 minutes and you'll get an instant decision on coverage for up to $8 million.
Learn more: How to help protect your loved ones with term life insurance
4. Life insurance is most likely tax-free.
You typically don’t have to worry about your partner, children or other beneficiaries being taxed on a life insurance payout because the proceeds are generally not includable in gross income and don't have to be reported to the IRS. We recommend consulting with a tax professional to determine what's best for your situation.
5. Covering funeral expenses is the most popular reason people buy life insurance.
One survey found that 60% of policy holders say covering burial and funeral expenses is the main reason they own life insurance. Other top reasons include transferring wealth to family, helping to replace lost wages, supplementing retirement income and paying off an existing mortgage.
Recent studies estimate 51% of Americans have life insurance — leaving nearly half of the country unprotected.
6. Life insurance may get more expensive as you get older.
You might think you don’t need life insurance because you’re young and healthy, but that’s exactly why you should consider getting coverage. Because your life expectancy goes down as you age (and the likelihood the insurer will have to make a payment goes up), the younger you are, the lower your premiums will likely be.
7. Life insurance has a gender gap.
Did you know women have longer life expectancies than men? That means women will almost always pay less than men of the same age and general health. However, men are more likely than women to report owning life insurance.
8. Many personal factors influence your life insurance rate.
Health, family medical history and driving record are all taken into account when determining your insurance premium. Your occupation and lifestyle is also considered — if you have a dangerous occupation, such as a delivery driver or first responder, you may be charged more. 9. Life insurance companies pay out billions of dollars in claims and benefits each year.
In 2024, life insurance benefits and claims reached $965.6 billion. That’s over $100 billion more than the total paid out in 2023.
10. The need for life insurance is growing.
Four in 10 American adults believe they need more life insurance because insufficient coverage could have major consequences for their families.
Help make an informed decision about life insurance
Now that you have the facts, you can be confident in your decision on whether to purchase life insurance. Get off to a strong start with Ally. We’ve teamed up with Ladder to offer innovative term life insurance with an easy online application process.
