Money Management

Life insurance is something you should hope to pay for and never use. 

There are certain expenses in life that we all have to pay for. We all need housing, a way to get to work or around town, food, and medication. Plus, we need a way to communicate with others (enter cellphones), electricity, water, and heat.

Most people wouldn’t hesitate to label all of these expenses as “essential.” But what about life insurance? Some folks might say that it’s a waste of money — especially if you don’t end up getting any use out of it. But actually, paying for life insurance and never having your policy pay out any money is a really great thing.

Something you pay for and hope to never use

There are certain types of insurance you can plan or hope to use, and certain types you hope you’ll never have to. Health insurance falls into the former category. Presenting your health insurance card at a doctor’s office could mean getting free preventive care, or getting treatment for an illness or injury at a much lower cost than you’d get stuck with in the absence of insurance.

Meanwhile, car insurance is the type of coverage you might hope to never use. If you’re forced to file a claim against your auto insurance policy, it means you’ve been in an accident or had your vehicle sustain damage, which clearly isn’t what you want. Rather, you’d probably prefer to have car insurance but never actually have a need to file a claim against it.

Life insurance works similarly. Let’s say you’re 35 and you buy a term life insurance policy (which is generally a far more cost-effective means of securing coverage than a whole life policy) that gives you coverage for 30 years. If you make it to your 65th birthday, you can argue that you just “threw away” money on 30 years’ worth of premiums. But guess what? You also got to remain on this planet as a living human. So that’s hardly something to be aggravated about.

In fact, your whole intent in buying life insurance should be to hope it never gets used. But just as you never know when you might get into a fender bender on the road, you never know when you might pass away unexpectedly. And just as you wouldn’t want to get stuck with thousands of dollars in car repair costs following an accident, so too would you not want to leave your loved ones to struggle financially in the event of your untimely passing.

A worthwhile expense, even if it amounts to nothing

You may not end up getting your money back, so to speak, when you pay for life insurance. But what you will get is peace of mind — for yourself and the people in your life who depend on you financially. And for that reason alone, it’s worth buying coverage. And it’s also worth thanking your lucky stars if you reach the end of your policy’s term without having received a payout from your life insurance company.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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You may not like the answer. 

Your credit score is an important number, namely because it tells borrowers how much risk they’re taking on in loaning you money or extending credit to you. If your credit score is high, it sends the message you can be trusted with a line of credit or loan. And as a result, a credit card company or lender might reward you with a lower interest rate on the sum you’re borrowing.

A poor credit score, on the other hand, tells lenders that you’re more of a risk. And so you might get stuck paying a higher interest rate on a loan if your credit score isn’t in the best shape. Or, you may be denied the option to borrow altogether.

Now, there are different factors that go into calculating your credit score. But the factor that carries the most weight is your payment history. If you have a history of paying your bills on time, it gives lenders more confidence in your likelihood to repay a loan.

However, not all bill payments are reported to the credit bureaus that determine your credit score. While it’s a good idea to be on time with your utility payments, doing so may not help bring your credit score up.

Utility bills generally don’t count

Utility bills are something many people pay on a monthly basis, so you’d think they’d be counted in the context of your credit score. But actually, most utility companies don’t report payment information to the credit bureaus. So even if you manage to pay your electricity bill or heating bill on time every month, it may not do much for your credit score.

Of course, it still makes sense to pay those bills on time, even if they don’t help your credit score improve. Being timely could help you avoid late fees. And if you’re very late in paying utility bills, you could, in an extreme situation, risk having your service shut off.

Bills that do count toward your credit score

While utility bills generally aren’t factored into your credit score, installment loan payments and credit card payments are. So let’s say you owe money on a mortgage loan. If you’re on time every month, that could help you boost your credit score, or keep an already solid credit score in good standing. Similarly, timely auto loan and personal loan payments could help your credit score rise.

Paying your credit card bills on time could also help your score. And to be clear, you’ll be counted as having made an on-time payment even if you only pay the minimum due each month, provided that payment is made by its deadline.

Of course, it’s really not a good idea to only make your minimum credit card payment month after month, because any balance you carry forward will accrue interest. And actually, too high a credit card balance relative to your total spending could drag your credit score downward. That factor doesn’t carry quite as much weight when calculating your credit score as your payment history. But it’s something you don’t want to gloss over, either.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More