There are various reasons why people get life insurance. Perhaps the most common reason is family. Whether you’re married with kids and want to provide a good life for them after you’re gone, or you are the primary caregiver for aging parents and want to leave them support if something bad happens, one of the best things you can do is to have life insurance.
Life insurance does many things for you and your family, mainly monetary. But before we get into that, there are some things you should know first before you get life insurance.
What is Life Insurance?
Life insurance is essentially a contract between you and your policyholder, ensuring you’ll leave money behind in the case of your death. In return, you will have to pay periodic payments called premiums.
Most of the time, you’re required to pay premiums monthly. The premium you will pay will be based on many different things, like your age, gender, medical history, lifestyle, credit score, the amount of money you want to have in your insurance, and the type of insurance.
In the event of your passing, this insurance will provide money to your beneficiaries. They can then use the money for a plethora of purposes. Other types of life insurance also have other benefits.
For example, permanent life insurance or whole life insurance has a cash value component you can use while alive. But it’s also important to take note that if you stop paying your premium and the contractual grace period has passed, that will be a lapse in life insurance. When that happens, your coverage will stop. Thankfully, some policies allow you to get back after meeting a few requirements.
When Should You Get Life Insurance?
You should purchase insurance as soon as possible. Unfortunately, many young adults don’t think about it (who likes to think about death?) or don’t feel they can afford it. However, the sooner you get life insurance, the cheaper your policy is likely to be. Anyone who has a family member (parent or child) depending on them should have life insurance to ensure their family is financially secure after their passing.
You can even get life insurance for your children. Children aren’t required to have a health check before getting a policy, so this can be a way to guarantee that your child isn’t later denied insurance due to health issues. You may also be able to pay off your child’spolicy by the time they are young adults, so they don’t have to cover it themselves but enjoy the same security and benefits.
With all that said, what other benefits could you and your family have if you get life insurance? Here are some of the benefits that your family will receive.
No Worries about Living Expenses
Although it depends on how much you want to have on your life insurance and the type of policy you want, most experts recommend getting insurance equal to at least seven to eight times your annual income. If you have a policy of that size, your family won’t have to worry about their living expenses once you’re gone. Because of that, they can use their money for other important things like your child’s education.
Cover Your Funeral Expenses
The national median cost of a funeral, including viewing and burial, was almost ten grand back in 2021. Because of the staggering amount and most people not having enough income for a funeral, it can be a huge burden for family members to shoulder all these costs. Some people even get loans to pay for a funeral.
However, with life insurance, you don’t have to worry about burdening them with your sudden passing. One of the benefits your family will have is that the policy will cover funeral expenses and other costs. It’s a nifty perk that allows them to focus on mourning rather than worrying about the expenses of their family.
Pay for a Child’s College
One of the biggest types of debt that US citizens commonly face is student debt. Education in America is expensive, and it’s common to get student loans to attend college. These loans may be pricey (depending on the degree), and some adults still pay for their years after college. Some can even go for a decade without a well-paying job to pay off their student loans.
With life insurance, you don’t have to worry about your child’s college expenses since, depending on the type of life insurance and the coverage you get, your policy can pay for your child’s college education after you’re gone. Not only that, but if you pick permanent life insurance, your policy will gain value over time, which you can get and pay for your child’s education even if you’re still living.
Supplement Your Retirement Income
If you purchase permanent life insurance, you’ll generally have access to the cash value your policy has accumulated through the years.
You can withdraw a part of it for an emergency or if you want to enjoy the rest of your life with your family. However, your policy should not replace retirement accounts like 401k or an IRA. Life insurance is supposed to be used when you’re gone, and accounts like 401k and IRA should be used solely for your retirement.
Not to mention that for your insurance to gain a cash value component, it has to be permanent life insurance. Other types of insurance, like term life insurance, don’t offer a cash value component. This means you have nothing to withdraw from when you’re alive and well.
Get Your Life Insurance Today!
It can be stressful to think about your family’s future in case you die suddenly. However, knowing that you’ll leave something behind that they can use once you’re gone can relieve it. It might be a grim thought, but preparing for your death is necessary, even if you’re still young and kicking.
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