Why Life Insurance
Life Insurance – an excerpt from Bobby Uppal’s Insurance Book, “We’ve Got you Covered: A Guide to Common Questions and Answers.”
Did you know that most Americans don’t have enough life insurance? In fact, most Americans don’t have life insurance at all. Why? Is it because you have competing financial priorities and you don’t see the point in having life insurance? Or is it because you simply don’t think you can afford it? Deciding whether you need life insurance in your life doesn’t have to be a complicated process. And you don’t have to find this decision even more challenging because you think yourself at too young of an age to be needing this coverage.
Out of all the different insurance policies we’ve discussed and broken-down for you in this book, none hold the importance that life insurance can in both your life, and the lives of your loved ones.
| 85 percent of consumers agree that most people need life insurance, yet only 62 percent say they actually have it. (Source: LIMRA’s Life Insurance Barometer Study 2013)40 percent of Americans who have life insurance coverage don’t think they have enough. (Source: Genworth LifeJacket Study 2011) |
Q: How do I know if I need life insurance?
A: Okay you could write an entire book on life insurance. Typically, most of us need some form of life insurance. Life insurance is basically used for many facets, for example; to provide security and income to your loved ones in the event of your demise or; to be used to pay for expenses or costs incurred as a result of taxation at the end of life for someone. If you have a lot of assets and you know that you are going to have state tax or inherent tax, this can help pay for it. If you don’t have a lot of assets and the loss of your income or earning potential for those years is to financially impact your loved ones, then you would use life insurance for that. Most of us need life insurance.
Life insurance can be broken down into a couple of key points. First of all it can provide you with a guarantee of future insurability, disregarding circumstance. For example if you develop an illness and are unable to receive medical insurance, but you already have a life insurance policy actively in place than you can still be protected. It can also be used as a way to create cash, or more specifically cash build-up of funds as a part of your general, overall financial plan. It all depends on what you are trying to do, but generally the rule is the younger you are when you take out a life policy the lower the premium that you can lock In- this is due to the fact that at that age your mortality rate is more in your favor.
There are many different ways that taking out a life insurance policy can affect your life.
(1.) Providing for Your Dependents If You Die Let’s start with the most obvious reason for why someone should invest in life insurance … the fact that it can replace your income if you die before your dependents. You may want your children to go to college and your family to enjoy a certain kind of lifestyle. Likely, you still want this to happen even if you die prematurely. But, if you are the primary bread winner for your family, they may not be able to afford it if you die and do not have enough savings to cover their expenses. You can address those concerns by buying an adequate amount of life insurance.
(2.) You Have Options You have the option of buying a term life insurance policy, which would cover you for a set number of years, generally ranging from 10 to 30 years. These policies pay a benefit only during the term period that the insurance covers. These can be a good option if you want coverage for a set period, say, until the children finish college. You also have the option of buying a whole life policy, also known as permanent life insurance. There are several types and sub categories of each type, and they usually pay a benefit to your beneficiaries when you die. (The amounts the premiums will be will depend on the policy you purchase.)
(3.) Life Insurance May Be a Good Investment You never know what will happen in the future. And I don’t mean this to come across in pessimistic light, but in the case of a life-threatening scenario life insurance is a good investment to make sure above all else the ones you care about are protected, when you yourself no longer can protect them. You take out a homeowners policy to cover your house, and a health insurance policy so that you have coverage if you ever get sick. A life insurance policy works in the same way, it provides a safety net for the very people you took out that health policy, that auto policy, to protect.