There are a lot of reasons why you should get life insurance. From protecting your loved ones financially to preparing for any emergencies, there are many things your insurance can cover if you’re smart with it.
Not only that, but the earlier you get insurance, the less you’ll have to pay as it matures, not to mention that you can compound your investments for your insurance if you choose a variable life insurance policy.
What is Life Insurance, and How Does It Work?
The main goal of getting life insurance is to allow your loved ones’ financial quality of life to remain the same if you suddenly die. For life insurance, you will be paying a monthly or annual premium in exchange for your loved ones getting a lump sum of money in the case of your death. Note that the money they will be getting is preset according to the coverage you paid for.
This coverage is customizable, and it will be charged to you as an addition to your monthly or annual premium. That said, life insurance plans can cover many things in the case of your death.
For example, this money can cover your unpaid mortgage and estate taxes. The loved ones you left can also be granted money for their living expenses. It can even cover your child’s college expenses and medical expenses in the future long after you’re gone.
For your family to get this money after you die, they have to fill out a death claim form and give it to the insurer. The family can then receive the money once everything is checked out.
Of course, life insurance plans also have coverages when you’re still alive, like medical assistance, financial assistance during emergencies, etc. So it all depends on the coverage you want to have in your insurance plan.
Types of Life Insurance Plans
When you decide to get life insurance, it’s important to know what types of policies you can have. There are several variations to life insurance plans, but they mainly fall into two categories: term and whole. These two are the most common among companies selling life insurance.
Term life insurance is designed to cover you financially during a set term. It still works like a regular insurance plan where you pay for either monthly or annual premiums, and your beneficiaries can get the money after you die. However, as the name suggests, the policy can only last for a set term, commonly 20 to 30 years. If you live longer than the contract, your beneficiaries don’t get any money.
On the other hand, whole life insurance covers you for life as long as your premiums are paid. In addition, certain policies can even offer policyholders an investment component where their insurance can hold value over time. As a result, you often hear financial advisers recommending life insurance as a form of investment because of the investment component they incorporate.
However, when you compare the cost of both term and permanent plans and the premiums you have to pay, permanent/whole life insurance plans tend to be the more expensive. But you can also compare life insurance rates to find one that fits your budget without sacrificing the benefits you receive.
Who is the Most Suited for Life Insurance Plans?
Having life insurance is often a good decision if you have dependents or partners. Of course, when you already have a significant amount of savings in the bank, life insurance may not be all that useful. But even then, it’s still may a good idea to have one if your death would significantly impact your dependents’ quality of life. One example of this is your children. Kids are expensive, and raising them on a single parent’s salary can be compromising.
Even with both the husband and wife, raising a child is hard. Add that to the fact that in the case of one of the parents dying, the financial struggles will be endless because the family unit lost one of its breadwinners. So if you’re worried about passing away before your time, think about what would happen to your child or partner when you’re gone.
Grieving is already hard enough as it is. Add the financial burden you’re leaving them with, and the situation could be dire.
Is It Worth It?
The answer to this depends on your circumstances. If you have a lot of dependents and you’re worried about what would happen to your family if you suddenly died, getting a good life insurance plan is a good decision.
However, if you’re single and without dependents, you should still consider getting insurance to avoid passing the burden of your burial preparations to the loved ones you left. Some experts say that you don’t need life insurance if this is the case, but we say otherwise.
If you’re worried about leaving your loved ones financially burdened if you die, life insurance plans are a good contingency plan. Yes, it can be costly, but at least, when you die, you won’t be burdening your loved ones with debt. Paying a premium regularly is a small price to pay if you want to leave your family financially secure.