For many people, the first introduction to life insurance is when a friend or a “friend of a friend” gets an insurance license. For others, a close friend or relative died without having adequate coverage or any life insurance. For me, I was introduced to a life insurance company where I had to set appointments with friends and family as I learned the ends and outs of the industry and hopefully, make some sales.
Unfortunately, however, this is how most people acquire life insurance – they don’t buy it, it is sold to them. But is life insurance something that you truly need, or is it merely an inconvenience shoved under your nose by a salesperson? While it may seem like the latter is true, there are truly many reasons why you should buy life insurance.
As we grow older, get married, start a family, or begin a business, we need to understand that life insurance is absolutely necessary. For example, picture a safety net. You may be the greatest tightrope walker in the world, without a doubt. You could perform without a net, but, “Why?” You cherish your life and the life of those close to you and you wouldn’t do anything that showed that you felt differently. Let’s confront it, we have no control over the unpredictability of life or of unforeseen occurrences. With that in mind, just as a safety net protects the uncertainty life, so does life insurance. It is an indispensable and basic foundation to a sound financial plan. Over the years, life insurance has given many caring and responsible people the peace of mind knowing that money would be obtainable to protect the ones most important in their life, family and estate in a number of ways, including:
1. To Pay Final Expenses
The cost of a funeral and burial can easily run into the tens of thousands of dollars, and I don’t want my wife, parents, or children to suffer financially in addition to emotionally at my death.
2. To Cover Children’s Expenses
Like most caring and responsible parents, it is necessary to be sure that our children are well taken care of and can provide a quality college education. For this reason, additional coverage is absolutely basic while children are nevertheless at home.
3. To Replace the Spouse’s Income
If one parent passes away while the children are young, the surviving caring parent would need to replace that income, which is basic to their lifestyle. The responsible surviving parent would need to hire help for domestic responsibilities like cleaning the house, laundry, and cooking. Add to that equation if it is a single parent, helping with schoolwork, and taking your children to doctor’s visits.
4. To Pay Off Debts
In addition to providing income to cover everyday living expenses, a family would need insurance to cover debts like the mortgage, so they wouldn’t have to sell the house to stay afloat.
5. To Buy a Business Partner’s Shares
In a business partnership, the partners need insurance on each other partner’s life. The reason is so if one dies, the others will have enough cash to buy his interest from his heirs and pay his proportion of the company’s obligations without having to sell the company itself. They have the same needs (due to the risk that one of the partners might die), and they simultaneously purchased insurance on each other’s life.
6. To Pay Off Estate Taxes
Estate taxes can be steep, so having insurance in place to pay them is basic to avoid jeopardizing assets or funds built for retirement. Use of insurance for this purpose is most shared in large estates, and uses long-lasting (instead of term) insurance to ensure that coverage remains until the end of life.
7. To Provide Living Benefits
With the advancements in medicine and rising healthcare costs, people are living longer, but cannot provide to. Living benefits is an option to use death proceeds before the insured dies to help with obligations or necessities to ease the pressure on themselves and others.
How Much Coverage Should I Buy?
The confront amount, or “death assistance” of an insurance policy (i.e., the amount of proceeds paid to the beneficiary) should be high enough to replace the after-tax income you would have earned had you lived a complete life, presuming you can provide the annual premiums for that amount. In other words, the insurance replaces the income you didn’t have the chance to earn by living and working until retirement due to a premature death.
The proper amount of insurance allows your family to continue their lifestyle, already though your income is no longer obtainable. The actual amount that you should buy depends upon your present and probable future incomes, any special circumstances affecting you or your family, and your existing budget for premiums.
Whole Life or Term?
Some people prefer to excursion Cadillac, Lincoln or Rolls Royce, which come with all of the electronic gadgets that make driving safe and as easy as possible. Others prefer less customized makes, equally reliable to their more expensive cousins, but requiring more hands-on attention.
Whole life is the “Cadillac” of insurance; these companies try to do everything for you, specifically investing a portion of your premiums so that the annual cost doesn’t increase as you grow older. The investment characteristic of the insurance method that premiums are generally higher than a similar term policy with the same confront value. After all, whole life insurance is intended to cover your whole life.
Term insurance, however, is permanent life insurance. There are no excess premiums to be invested, and no promises or guarantees beyond the end of the term, which can range from 1 to 30 years. The annual premium for term insurance is always less than whole life, lacking the investment part, but your premiums will rise (often significantly) once the term period expires.
Both types of life insurance, term or whole life (or one of their derivatives) have benefits and drawbacks; both have their place depending upon the needs, desires, and financial objectives of the purchaser. A knowledgeable specialized insurance agent can help you decide which kind of policy is best for you depending upon your circumstances. But whichever you select, be sure that you have enough coverage to meet your objectives in the short term and the long term.
The Last information
Some people mistakenly believe that life insurance is a scam. This is because the money for premiums is lost if death doesn’t occur during the coverage period (in the case of term insurance), or because many people live to a mature old age and continue to pay their long-lasting insurance premiums. Such naysayers compare life insurance protection to gambling, and forgo the protection thoroughly.
There are others, who have the belief that life insurance does not help them. To those individuals, the answer is: You are absolutely correct! The truth of the matter is that life insurance is a way for caring and responsible people to help ensure that their family can continue to move forward in the event of your untimely decline, a truly difficult time of loss. Of course, there is no bet – you will die, but no one knows when. It could be today, tomorrow, or 50 years into the future, but it will happen ultimately.
Do you have life insurance? Why or why not?