What is Life Insurance? You May be surprised at the Details
If you’re like most people, you think that life insurance only applies to people with families and mortgages and that the whole process of purchasing and maintaining it is too much of a hassle. In reality, though, even if you’re single and childless, chances are you need some sort of life insurance policy to protect your financial future. Here are just a few details about life insurance that might surprise you!
Why do I need life insurance?
While life insurance isn’t necessary for everyone, it can provide some serious protection to your family in case of your untimely death. Depending on how much coverage you want, buying a policy can also allow you to save for retirement or other financial goals because it will reduce or eliminate your taxable income. So what are you waiting for? Let’s take a look at why life insurance could very well be a good choice for you and your family. The following information will help explain what life insurance is and who needs it.
Planning your family’s future isn’t always easy
There are many life insurance terms that can get confusing. Luckily, there are other options out there to help protect your family’s future. Here’s a breakdown of some of those policies, so you can choose which is best for you and your family
How much should you get?
Once you have your answers to these questions, determining how much life insurance you need will become clear. In fact, as you learn more about life insurance terms, like death benefit and cash value, what you think you want may quickly change. Life insurance can provide a lot of benefits for your family when used correctly. However, it’s important to understand what those benefits are before purchasing a policy.
Who can help me decide what type of policy I need?
One of the first things to do if you want to get life insurance is to find a local broker. Life insurance brokers help customers figure out what type of policy they need and go over all life insurance terms. All policies are a little different, so it’s important to work with someone who can walk you through your options and make sure you know exactly what you’re paying for. When searching for an agent, make sure he or she has passed any state licensing requirements and belongs to a reputable organization such as The National Association of Insurance Commissioners (NAIC). And ask family and friends if they have anyone who might give them a referral; an independent third party may offer more unbiased advice than someone who wants to sell you something!
How do I make sure that my family gets the money they deserve if something happens to me?
What if you died tomorrow? Would your family have enough money to live on, or would they have to work hard for years to keep up with their everyday expenses and save up so that they can enjoy life more in retirement? What happens if you become unable to take care of yourself due to illness or injury, who will take care of you and pay your living expenses and medical bills until you get better. When purchasing a life insurance policy there are two types of beneficiaries in a policy: primary and contingent. The primary beneficiary receives all benefits upon the death of the insured person. The contingent beneficiary receives all benefits only if there is no surviving spouse or children.
If you have children, it can be hard to imagine your life without them in it.
If you have kids, life insurance probably seems like an unnecessary expense (or something you’ll get to later). But just as it’s important to plan for retirement early in your career, planning for death—and what will happen to your children if something happens to you—is an important part of financial planning. If a child-only policy fits into your financial plan, it can provide much-needed security for your loved ones and peace of mind for you. That said, buying life insurance isn’t always easy—there are lots of options and carriers who offer them. Start by asking questions about how much coverage will cost, who’s eligible for it, and what type might best fit into your overall financial plan.
Should I tell my kids about it? How young is too young for that conversation?
One of your biggest considerations, besides what kind of life insurance to buy and how much coverage you need, will depend on whether or not you have kids. Whether or not you should tell them depends on their age. If they’re too young, then no. If they’re older and mature enough to understand that death is permanent, it’s okay to include them in an adult conversation about your wishes if you want them to know how much they mean to you. ____
Do I really need a financial planner to help me with all this stuff or can I figure it out on my own?
It all depends on your needs and your ability to pay. Many people can work through most of their financial issues on their own, but if you have major problems such as saving for retirement or college planning, it’s worth finding a financial planner to help you figure things out. But even if you do hire someone to help you, make sure that they fit your personality and philosophy. Your relationship with your financial planner should be one of trust and partnership so that when a problem comes up (and they will), you feel like you’re working together toward a common goal rather than just handing over your money and waiting for them to fix things.
Where do I start if I want some help finding a policy and working through everything else involved in creating my plan?
First, ask yourself what you need. Do you have kids in college or a spouse who relies on your income for support? Are there any debt obligations that would force you to liquidate your assets before retirement? How about burial expenses for those close to you who have passed away recently? Then, write down how much insurance coverage each of these needs will require and take a look at some sample plans from insurers. If you’re still overwhelmed, get in touch with an agent who can help guide your decision-making process with advice that fits into your specific situation.