Considering our own mortality isn’t pleasant, but it’s a factor of life. While we all work hard to live comfortably, we wouldn’t want to leave our loved ones grappling with financial struggles. Have you ever wondered why you need life insurance?
It acts as a safety net, providing a financial benefit to your family when you’re no longer present. You may be questioning its necessity in your life. We’ll go through some critical factors that indicate why you probably should consider life insurance. But before that, let’s understand how it operates.
What exactly is Life Insurance?
Life insurance is an agreement between you (the policyholder) and the insurance provider. You commit to paying regular premiums, and in return, the insurer will provide a specific sum of money to a designated beneficiary upon your death.
Many Americans have life insurance, but approximately 27% don’t have adequate coverage.
There are mainly two types of life insurance: Term and Whole.
Whole Life Insurance is excellent for estate planning, part of the premium builds cash value, and the policy also yields dividends, increasing cash over time. However, premiums would be significantly higher than Term Life Insurance to buy sufficient actual insurance protection if you died.
Term Life Insurance is a specified term plan – anywhere from a few years to as many as 30 years. You pay a monthly premium based on several factors such as:
– The amount of coverage you need
– Your age
– Income
– Debts
– Current health status
These plans hold no cash value and exist only for the term specified in the contract, so premiums are generally lower, making it a more budget-friendly option. Upon term completion, you can apply for another term life insurance policy.
Do you need life insurance?
Yes, life insurance provides a cushion for your family if you die prematurely. But it also adds another bill to your payments. Is it worth it, especially if you’re single without many liabilities? Here are five compelling reasons why life insurance is crucial.
1. Recover Lost Income – It plays an especially significant role for married couples, particularly if a parent in the household is not earning. The loss of funds could bring financial strain, but life insurance can replace the income, ensuring a smoother transition.
2. Clear Debts – Death doesn’t eradicate certain debts like private student loans. When calculating your life insurance policy, consider your current reception of debts.
3. Fund Your Child’s Education – As a parent, you’d want your children to receive quality education no matter what happens to you. Your kids can be beneficiaries to help them pursue higher studies.
4. Budget-friendly protection – Life insurance policies don’t necessarily break the bank. Term life insurance is quite affordable and manageable within your budget.
5. Peace of Mind – Providing financial security for your loved ones in case of your demise should make you feel accomplished. Understanding that your family will have funds to cover debts and essential bills should bring you comfort.
Securing your first policy need not be strenuous; it doesn’t have to involve doctors, needles, paperwork, or waiting.
Click here and select your desired policy amount after getting an instant quote.
Do share your thoughts on life insurance in the comments section below.
Source: SmartAsset.com
