Life insurance is essential for protecting your finances, your family, and your assets. Whether you need to make sure your debts are paid in the event of your untimely passing, or you want to have a source of funds for medical expenses, life insurance is a good idea for most consumers.
However, there are plenty of details that can make choosing a suitable life insurance policy challenging. Choices ranging from identifying how much coverage you need to how much you can afford to pay for your premium are all critical considerations.
Today, we will discuss the main benefits of life insurance and how you can identify which are the best policies for you and your family.
Life Insurance Protects Your Family and Your Finances
Whether you are the primary breadwinner for your family, or you and your spouse both work, you may end up in a financial predicament if one of you dies unexpectedly. Loss of income can be devastating if you don’t have a plan, and life insurance is one of the best ways to mitigate the permanent loss of income.
For example, if you have an insurance policy that will pay out $600,000 as a death benefit, you could use those funds to pay off any debts, pay your expenses, and cover your children’s education.
Life insurance policies can also protect your home if the policyholder dies unexpectedly. Suppose you have a mortgage on your home, your insurance policy and step in to pay off the loan so that your debts do not go to anybody else or default.
Setting Goals With Life Insurance
As you research different life insurance policies, it’s essential to set goals and understand why you are buying life insurance. Some consumers prioritize saving money on their monthly premiums, While others may want to take the opportunity and invest extra money where they can.
- Saving Money
According to actuaries, life insurance policies become more expensive every year you get older. The reason for this increase in price it’s because here you live, the insurance company it’s taking on more risk for the policyholder to develop an illness or suffer disease.
Term life insurance policies are most affordable because you lock in a set coverage amount for a defined time period – usually 10, 20, or 30 years. Once the term is over, you can either get a new insurance policy or allow your coverage to expire.
If you want to save money on your insurance premium and secure an optimal death benefit, the sooner you can apply for your policy, the better. Although your current priority may be saving money on your monthly premium, you may want to consider purchasing a term life insurance policy that can convert to a permanent policy. If you are interested in generating cash value, you could transform your insurance policy into a permanent policy when you can afford a higher premium.
- Making Money
Did you know that you could make money with a life insurance policy? Permanent life insurance policies such as whole life and Universal Life policies accumulate cash value The longer you pay into your premium.
Whole Life policies are the most straightforward permanent insurance policies because they are essentially savings accounts. You can withdraw the accumulated cash value, or you can take out a loan against it.
Universal life insurance policies take accumulating cash value a step further because you can either interest on the cash value or invest in cash value into the markets. Different insurance carriers may offer limited or more expansive range investment options, so be sure to research and identify which insurance policies align with your financial goals.
- Covering Expenses
Finally, you can use your life insurance policy to cover certain expenses depending on how the policy is structured. Some life insurance policies offer a disability income benefit where the insurance provider will pay you a monthly stipend out of your premium if you are unable to work or becomes disabled and rendered unable to make payments.
Life Insurance Add-Ons
Term and permanent life insurance policies already carry lots of customization and options for consumers. However, some people may benefit from additional features that can be added to a policy a la carte, is so we will discuss common additions and riders.
Riders are enhancements and add-ons for existing or new life insurance policies. Common riders include a waiver of premium which will relieve policyholders of the obligation to pay their premium if they become disabled or not able to work. Accidental death benefit riders are also common because they provide additional coverage if the insured’s death is caused by accident.
Accelerated death benefits are one of the most powerful riders because they can save the policyholder an immense amount of money if they contract or develop a terminal illness. For example, accelerated death riders can pay for cancer treatments and other expensive medical procedures while the policyholder is still alive.
- Policy Additions
Some life insurance policies are flexible and enable you to add or subtract coverage and beneficiaries. Read your insurance contract before you sign it to see if you have the option to convert your policy into a permanent life insurance contract, utilize living benefits for medical expenses, or withdraw funds from the accumulated cash value of a permanent life insurance policy.
Who Benefits From Life Insurance?
Everybody from a young professional to a retired couple can enjoy the benefits provided by life insurance. Since many different life insurance products are available, you can tailor your policy to best fit your needs and budget.
Remember, you can cancel your policy, convert your policy to a permanent policy if you have term coverage with a convertible Clause, and much more. The most crucial component of finding the right life insurance policy is budgeting for the price of premiums and estimating how much coverage you need. There is a delicate balance between underinsured and overinsuring, so take the time to calculate how much money it would take to replace your income and cover your debts.
Although life insurance is not the most exciting tool in your financial toolbox, it can be very powerful and Potentially save your family hundreds of thousands of dollars.
Since your life is dynamic, it pays to remain flexible and up to date on insurance premiums and benefits. One period of your life may require a simple term life insurance policy to protect your home and another benefit from a universal life insurance policy where you can invest the accumulated cash value.
If you want to learn more about life insurance, be sure to check out our other guides and reviews!
* This content is not provided by the financial institution or the offer’s provider. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and does not constitute a financial or expert advice.