You’ve probably heard a lot about life insurance. In fact, you’ve probably heard an equal amount of people saying you need it and you don’t. But what’s the truth? The truth is this: Life insurance has the ability to act as a protective blanket for your loved ones when the unexpected happens to you – and with the unexpected capable of happening at any time, the problem of not having life insurance becomes a problem for today – not tomorrow.
Since life insurance helps with planning for you and your loved one’s long term financial health and happiness, it is a crucial piece of any financial planning puzzle.
What is Life Insurance?
Life insurance is a legally binding contract between the insurer (an insurance provider) and the policyholder, where the insurer guarantees the payment of a designated amount of money, known as a death benefit, to the named beneficiaries on the policy when the insured dies. Life insurance comes in a variety of types, all which are designed to serve a unique purpose, which is why it’s important to explore your options and do your research before committing to any one policy. After all, of the 54% of American adults who have life insurance, 27% don’t have adequate coverage – a major problem.1
Types of Life Insurance
There are many different types of life insurance available to consumers on the market today, all of which are designed to meet a different set of needs and preferences. Of them, the most common are as follows:
A type of life insurance policy that pays a stated death benefit if the insured dies during the specified term of coverage outlined in the policy. They usually feature no cash value component or additional value outside the death benefit.
Generally, a type of life insurance policy designed to provide coverage for the life of the insured. In addition to paying a death benefit, whole life insurance also contains a cash value component, which offers a living benefit to the policyholder.
Burial or Final Expense Insurance
A small whole life insurance policy designed to pay for one’s final expenses, like burial or cremation, embalming, and memorial services. Generally, these policies have a smaller death benefit than other types of whole life insurance.
Do You Really Need Life Insurance?
While life insurance may be considered a morbid part of personal finance, it is an important thing to consider. No ones likes to think about their loved ones struggling to keep their home or put food on the table. The right life insurance policy can help ensure they’re protected financially, even if you’re not there to protect them yourself.
If you are a primary income earner or caregiver in your home, if you have children or plan to have children, if you have debt, if you own or plan to own a home, or if you think your loved ones would struggle without your income if you were no longer there to provide it, then yes – you should more than likely purchase life insurance.
5 Reasons Why Life Insurance Is Good for You
Not only do we know that life insurance is an important part of helping to secure your family’s future, but we also know purchasing life insurance comes with a number of benefits. Let’s break down five of them.
1. Life insurance is part of a sound financial plan.
Since life insurance helps with planning for you and your loved one’s long term financial health and happiness, it is a crucial piece of any financial planning puzzle. Ask yourself, can you afford to know that your family could be part of the percentage who struggles to make ends meet after your death? You may not think it’ll happen to you, but with four out of 10 American families confirming they would have immediate trouble paying for living expenses without their primary wage earner – you may find yourself part of that percentage without the right life insurance coverage.2
2. Life insurance can help you pay for things…when you’re still alive.
Everyone thinks life insurance is all about the payout after you die, but fail to remember that some policies out there can help you secure cash value over time, cash value which you can use as living benefits. That means you can use this money to help pay for emergencies, a down-payment on a car, a mortgage, or anything else. But be careful, as any money you take out as part of your living benefit may directly impact your death benefit.
3. Life insurance can help provide funds for your kids’ college education.
We all know how expensive tuition can be – especially if your child decides they want to pursue their degree out of state, out of country, or at a private institution. Thankfully, life insurance can be used to help pay for all those things – either through a death benefit or through the use of acquired cash value – keeping the kids in school, and keeping you stress-free.
4. Life insurance can help you retire in style.
Remember those living benefits I was talking about? You can use them to supplement your retirement income. Whether you’re short on funds, want to take a vacation during your golden years, or help pay for a new hobby – how you use your living benefit is up to you.
5. Life insurance can be effective without being expensive.
One thing that puts people off purchasing life insurance is the cost. The good news is life insurance doesn’t have to be expensive to be effective. In fact, there are a number of reasonable life insurance policies available to consumers today, so you don’t have to worry about breaking the bank in order to help protect your family.
There are a number of reasons to consider purchasing a life insurance policy, and with a wealth of options to choose from and prices for every budget, there really isn’t much of an excuse not to. To find out what life insurance policy is right for you, contact a licensed insurance agent or financial advisor.