For lots of people, the first introduction to life insurance is when a friend or a “mutual friend” get an insurance license. For others, a friend or relative passed away without having appropriate coverage or any life insurance. For me, I was introduced to a life insurance business where I had to set visits with family and friends as I discovered the ends and outs of the market and hopefully, make some sales.
Regrettably, nevertheless, this is how most people acquire life insurance – they don’t buy it, it is offered to them. But is life insurance something that you really require, or is it simply an inconvenience shoved under your nose by a salesperson? While it may seem like the latter holds true, there are really lots of reasons that you must purchase life insurance.
As we age, get married, start a household, or begin a service, we require to understand that life insurance is definitely necessary. For example, image a safety net. You may be the best tightrope walker in the world, without a doubt. You could carry out without the internet, but, “Why?” You treasure your life and the life of those close to you and you wouldn’t do anything that revealed that you felt in a different way. Let’s face it, we have no control over the unpredictability of life or of unexpected events. With that in mind, just as a safety net secures the uncertainty life, so does life insurance. It is a fundamental and essential foundation for a sound financial strategy. Over the years, life insurance has actually provided many caring and responsible individuals the peace of mind knowing that money would be available to protect the ones most important in their life, family and estate in a number of ways, consisting of:
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 afford a quality college education. For this reason, additional coverage is absolutely essential while children are still 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 essential to their lifestyle. The responsible surviving parent would need to hire help for domestic tasks 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 share 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 essential to avoid jeopardizing assets or funds built for retirement. Use of insurance for this purpose is most common in large estates, and uses permanent (rather than 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 afford 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 face amount, or “death benefit” 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 full life, presuming you can afford 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, even though your income is no longer available. The actual amount that you should purchase 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 drive Cadillac, Lincoln or Rolls Royce, which come with all of the electronic devices that make driving safe and as easy as possible. Others choose less personalized makes, similarly trustworthy to their more pricey cousins, however needing more hands-on attention.
Entire life is the “Cadillac” of insurance coverage; these companies attempt to do whatever for you, particularly investing a part of your premiums so that the yearly cost doesn’t increase as you get older. The investment characteristic of the insurance means that premiums are generally higher than a similar term policy with the same face value. After all, entire life insurance is planned to cover your entire life.
Term insurance coverage, on the other hand, is temporary 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 thirty years. The annual premium for term insurance coverage is always less than entire life, lacking the financial investment component, but your premiums will increase (frequently considerably) once the term duration expires.
Both kinds of life insurance, term or entire life (or among their derivatives) have drawbacks and advantages; both have their location relying on the needs, desires, and financial objectives of the buyer. A well-informed professional insurance agent can assist you to decide which type of policy is best for you relying on your scenarios. But whichever you pick, make certain that you have enough protection to meet your objectives in the short-term and the long term.
The Last Word
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 ripe old age and continue to pay their permanent insurance premiums. Such naysayers compare life insurance protection to gambling, and forgo the protection entirely.
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 demise, 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 eventually.
Do you have life insurance? Why or why not?