Insurance is just one way to provide a sense of security for yourself and your family. Knowing that any unexpected house, car, or medical bills will be covered allows you to develop a financial plan that works within your budget. However, life insurance policies are often overlooked, even by people who tend to plan for the future. Discussing what happens after you pass away might be scary, but life insurance policies can help ensure continued financial success for your family. This blog will help you determine if purchasing a life insurance policy is worth it for you.
What Exactly Is Life Insurance?
Life Insurance is a payout to a family member or beneficiary in the event of your passing. The type of life insurance you purchase will significantly affect the premium costs and payout amounts.
Term Life Insurance Plans are plans which only cover you for a set amount of time, generally 20 or 30 years. Term Life Insurance plans, especially if bought at a young age, have low premiums, as the insurance company is not assuming much risk. However, these plans work much like other types of insurance; at the end of your term, your protection will expire, and you will receive no payout.
Whole/Permanent Life Insurance plans will offer you protection for as long as you pay your premium, but these plans are often much more expensive. However, these plans often have associated investment components, with part of your premium going toward an investment account. A permanent life insurance plan might seem the best of both worlds, as coverage will not lapse, and part of your premium cost is reinvested. However, the returns on your investment will be much higher through other investment opportunities, meaning that permanent life insurance plans as a way to invest are primarily helpful for tax purposes for wealthy individuals.
What Types Of People Should Buy Life Insurance?
Now that you know the types of life insurance, you might be curious about what demographic of people should buy each type. Buying life insurance is most important for people caring for dependents. Life insurance is best seen as a guarantee that a tragic accident will not cause undue financial stress on your family members who cannot make up for the lost income you provided.
Spouses may decide that a life insurance policy is in their best interest if their lifestyle is only supported through a dual income stream. If the early loss of one family member would cause financial stress and debt accumulation, having a term life insurance policy can provide peace of mind in the short term. Conversely, if your household only has one primary breadwinner, a life insurance policy can guarantee that the family is protected if an accident befalls the one earning money.
If you are starting a family, taking out a term life insurance policy is a fantastic way to keep your family and children financially secure until they can provide for themselves. A term life insurance policy has significantly lower premium costs than a permanent policy and will provide for your young children and spouse if tragedy strikes. A term policy will expire once your kids have grown up, at which point the financial dependency they have on you should be minimal.
Life insurance policies can be complicated – and knowing which policy is best for you can be hard to determine on your own. Over 100 million American adults currently lack life insurance. If you would like to learn more about your options and protect your family, call the professionals at Anderson & Associates Insurance Group, located in Palmetto.
