This is a question that I myself have asked. Hell to me is too harsh a punishment for creatures weak as humans. But this is what I’ve discovered.
God is both just and merciful. Some may have a hard time seeing how the two can coexist. The simplest explanation for this is that our debt is paid - justice, and we aren’t the ones that paid it - mercy. Further exploration led me to the answer of why our punishment needs to be hell...
God is perfect, nothing imperfect can coexist with him. We, as sinners are imperfect. In order for us to go to heaven we need to become perfect. If God just made us perfect without punishing us, he wouldn't be a just God. You may he is cruel for condemning his own son to death, but how much more cruel would he be if he sent people to hell when all he needed to do is simply forgive them? But since God is just, there needed to be a punishment for sin. But what punishment would be enough? Anything less than death and we would have people literally getting away with murder after enduring said punishment.
But it's more than that. We were created as image-bearers of God, with the purpose of worshipping him and being in fellowship with him. As soon as Adam sinned, his worship became unworthy, his life lost its purpose, so to speak. True, we can still praise God, but how could the words of an untrustworthy human hold any worth? Sin made our lives worthless, so the punishment was death. Humans are meant to be an example to the angels (Ephesians 3:10-11) even to the extent that we are to be the judge of angels (1 Corinthians 6:3). Our testimony is worthless if we cannot be free from sin.
Why couldn't our own physical deaths be sufficient to pay for our sins? Think about that... if that were true, wouldn't that then mean that everyone would go to heaven? Essentially, everyone would be getting away with their sins - as a physical death means nothing compared to an eternity in heaven.
If mere physical death wouldn't really be a punishment for sin, what would be? Keep in mind that the afterlife is eternal. If God gave any finite time as a punishment for sin, the involved people would still be able to go to heaven afterwards, and for eternity, making any period of time in Hell seem like a insignificant length of time in comparison. A finite time spent in Hell has the same problem as a physical death. We would need to go to Hell because that's how bad our sin is to an infinitely perfect and just God, this is the only punishment acceptable, it's more than just a made up rule.
But we don’t need to go to Hell. We can simply worship Jesus as our Lord and Saviour and we’ll be accepted into Heaven.