The term Life Insurance does not really excite people into having a lengthy discussion on how valuable life insurance can be. There is quick apprehension when the topic of life insurance is brought up, and to be honest it is a valid feeling. No one wants to talk about their death along with how close family members can benefit financially off your demise.
However, once you get past this initial suspicious feeling, there are many meaningful purposes to having life insurance. If you take the time to learn about life insurance, then you’ll understand how necessary it is to have it, especially if you have a family.
What is Life Insurance
Before we can discuss the real value of life insurance, it is necessary to understand what life insurance is. In simple terms, life insurance is a contract between the insurance company and the policy holder. The insurance company agrees to pay a certain amount of money upon the death of the policy holder or after a set time period. It is the responsibility of the policy holder to pay the monthly premium. If the policy holder does not pay the agreed premium then the policy contract can be terminated. The policy holder will have a designated beneficiary that will receive the financial value of the life policy. In addition, the monthly premium due towards the life policy is determined by several important factors. Below are the key factors that impact the monthly premium:
Gender: Since women live longer the premium might be lower for them.
Age: The premiums are usually lower for younger people but does go up as their age goes up.
Career Occupation: Your job may possibly be high risk and may result in higher premiums.
Medical History: The current and previous medical history will impact the premium; depending on your medical history, you may be considered high risk.
Lifestyle Habits: Your daily life habits such as drinking alcohol or smoking can also impact your premium.
Family Medical History: Any known hereditary diseases may impact your premiums.
Life Insurance’s Purpose
Now that we understand what life insurance is, we can discuss why it’s so important to have it. The main argument for purchasing life insurance is providing financial security for your family and dependents in the event of your death. Protecting your family from the burden of debt and other financial hardship should be a priority, especially if the main breadwinner of the family passes away. Life insurance death benefits could help you cover the following living expenses:
- Rent/Mortgage payment
- Car payment
- Utilities
- Childcare/Daycare
- Medical Insurance
- School Tuition
- Credit Card debt
Another advantage for life insurance is if you’re an elderly individual who may need to consider long-term and funeral expenses, both could be covered through this insurance. Again, the burden of expenses should not be passed down to the family even when you are an elderly person. Funeral expenses can easily rise up in costs; if you do not have life insurance to cover your funeral expenses then the responsibility will fall on your family to cover all expenses. In addition to long term care and funeral expenses there are other benefits to life insurance.
Inheritance: Life Insurance can be a financial asset that can be passed down to your family. There can be some tax benefits of having life insurance as an investment as it is passed down to your family.
Business Protection: If you are a business owner, protecting your business can be an option by having life insurance provide financial assistance to keep the business surviving.
Retirement Income: Depending on the type of life insurance you purchase, you can add this to your retirement goals. Certain types of life insurance may offer cash value as a method for you to save money. The cash can be taken out to supplement your income during retirement.
Emergency Fund: It would be smart to be prepared for the unexpected events in life by having an emergency fund. Life insurance can be a tool used in your financial plans.
Finally, life insurance gives you the peace of mind knowing that if the unexpected or expected death occurs, your family will be covered. You cannot put a price on that peace you will attain knowing your family’s financial hardship will be eased.
The discussion of life insurance can feel depressing since the discussion is about death. However, that awkward conversation will definitely be worth it once you find a life insurance policy that fits your needs.
