Life insurance is critical to your long-term success. Life insurance provides protection for your family in case something happens to you. The purpose of life insurance is to mitigate risk, financial risk. If something happens to you, who will pay for children to go to school, who will pay for the mortgage, and who will pay the bills? Life insurance benefits also allow your spouse to properly grieve your loss and not worry about trying to meet daily expenses.
Life insurance offers one of the most important aspects of comprehensive financial planning, protection against financial loss resulting from the insured’s death. The insurance company pays the beneficiary the death benefit upon the passing of the insured. The death benefit is usually the face value of the insurance policy.
There are two main forms of life insurance, term and permanent life insurance. Term Insurance is the most common type of life insurance in the world. There are several components which are important to the success of term insurance. Firstly, it is easy to understand how term insurance works. Secondly, its premium stays leveled for the tenure of the policy. Thirdly, you don’t have to pay for insurance premiums for the rest of your life because the policy expires after a certain term, usually 10-20 years. Finally, term policies are inexpensive compared to permanent insurance.
Alternatively, permanent insurance is more expensive than term insurance. Also, the insurance doesn’t expire; it can last as long as the insured does. There are four main types of permanent life insurance policies: whole life insurance, universal life insurance, variable life insurance, and variable universal life insurance. Each one of these policies gives you the ability to accumulate cash value.
When seeking out an insurance policy, make sure that some of these apply to you:
· You are not single
- Short-term debt
- Long-term debt
- Home loan
- Auto loan
- Credit card debt
- Cost of college for any children
- Need it for qualified estate planning
If most of the above apply to you then consider getting insurance. You can think about how much insurance you need, talk to your financial advisor or use the above factors to determine the amount of life insurance needed.
An insurance policy is needed for the following reasons:
- Pay for final costs including, estate administration, funeral costs, and probate costs, medical fees and other debts
- Provide for your family or loved ones
- Contribute to your favorite charity
- Part of long-term comprehensive financial planning
Life insurance is a critical component of your overall financial picture, getting it provides the necessary protection for your loved ones.