4 Reasons to Increase Your Life Insurance in 2024

Whether you're flush with cash or carefully tucking money into a savings account each month, you're probably sticking to a budget of some kind. If that budget includes a life insurance policy, there are a number of reasons you should consider increasing the death benefit (sometimes referred to as "face value") during 2024. Here are four of them.

1. It's less expensive this year than it will be next year

Life insurance companies base the cost of a policy on your life expectancy; in other words, how many years you're statistically expected to live. Let's say your life expectancy is 85. At age 30, you're two years closer to the end of your life expectancy than you were at age 28. Therefore, the rate you'll pay increases.

If you've ever considered increasing the face value, it will cost you less this year than it will next year or the year after. For example, a healthy 30-year-old man who purchases a policy with a $500,000 death benefit can expect to pay around $400 per year. By the time he's age 40, the same policy will cost $600, and that's if he has remained healthy in the interim.

No matter how old you are right now, increasing the death benefit on your insurance policy this year will save you money and increase your peace of mind. After all, if you die, your beneficiaries will be left with more money.

If you decide to wait until you can afford to increase the face value of your policy, keep in mind that rates are also based on the health of the applicant. If you're diagnosed with a heart issue, diabetes, or any other serious medical issue, you can expect the rate you're quoted to shoot up.

Locking down a term life rate this year means never having to pay more for the policy, no matter what happens to you health-wise

2. Life insurance can be used to pay funeral costs

We don't want to think about our own or consider the death of a loved one. However, it's part of life. Someone dies, and others are left behind. At its core, carrying life insurance is about taking care of those we leave behind.

Let's say you're single and not worried about taking care of a family. Someone is still going to have to pay for your funeral. Even if you've told your loved ones that you don't want a funeral, someone is going to have to pay for your burial or cremation, neither of which is cheap.

Leaving enough life insurance behind to cover those final costs is one of the kindest things you can do for those who care for you.

3. To protect your loved ones with tax-free proceeds

If you're in a long-term relationship, married, a parent, or even a pet owner, you have someone counting on you. Upping your death benefit means making sure they have what they need when you're gone.

To determine how much you would like to increase your policy, take into account how much debt you'll be leaving behind. For example, if you owe money on a car loan or mortgage, you probably want to ensure they'll be paid off. If you have children, you'll want to know that the parent left behind will have enough money to keep a roof over their heads and feed them. You'll likely care whether they can afford to pursue higher education if they desire. And if you have pets, life insurance can be designated to provide for their care.

Let's say you increase the death benefit on your policy from $300,000 to $400,000. That means that you're leaving an extra $100,000 behind to help replace your income. It can mean the difference between staying in the family home and having to find a new place to live.

According to the IRS, life insurance proceeds are generally not taxable. Beneficiaries will have to pay taxes on any interest they receive, but not the actual death benefit.

4. To protect your business

If you own a business -- large or small -- increasing the amount of life insurance you carry can help your beneficiaries keep the business up and running if they so desire. If you're in business with someone else, it's not unusual for business partners to name each other as beneficiaries so one can keep the business open if the other dies.

While buying life insurance originally may have involved shopping around, increasing your death benefit is a bit easier. To get the ball rolling, call your original agent and let them know what you want to do. If your policy requires you to undergo another medical exam, insurers typically send someone to your home or office to take care of it.

Chances are, it will take less than one hour to ensure your beneficiaries can live their best life, even after you're gone.