Disclosure: This post contains affiliate links. If you use them I may receive commissions, at no extra cost to you. See my full disclosure policy for additional information.
At what point in life do you think you need to get a life insurance policy started? What age, phase of life, etc. What even if life insurance? Just someone putting a premium on what they feel my life is valued at? These, and many other questions regarding life insurance will be answered here in this article.
Any time, any phase, is the answer to the first question.
Once you are a working adult, whether you have children or not, life insurance is a great thing to have. You don’t have to be married and/or have any children in order for life insurance to be a good investment. Primarily for the loved ones in your life, such as parents, significant other, siblings, etc.
Life insurance is a sort of contract made between you an a life insurance provider, where you pay an agreed upon premium, in exchanged for a pay out from this insurance company to one or more of your pre determined beneficiaries upon your death. Providing financial security to your loved ones after you are gone, as well as to help them with any funeral costs they may face at that time.
Benefits of Life Insurance
There are a number of great benefits to opening a life insurance policy, so lets explore those little bit here. So that you can make an informed decision regarding opening your own life insurance policy.
Financial Peace of Mind
Life insurance allows you to have peace of mind, knowing that one day when you are no longer around, your loved ones will not need to carry the financial burden that comes in your absence. Between funeral costs, out standing financial balances, and so much more, life insurance will give your loved ones what they need to handle these things without needing to spend their own money in excess.
Cover Funeral Costs
If you are someone who is not aware of how expensive funerals can be, I am glad for you. That you have not had to plan and pay for the costs that come with the passing of a loved one. Especially when that death is unexpected.
According to Forbes, the death of a loved one can rack up a bill that is potentially as high as $20,000. Between the cost of the funeral homes services, buying a burial plot, the cost of funeral arrangements (flowers, music, food, etc), you are looking at several thousand dollars already.
Then there are costs that follow the funeral. Such as attorneys to handle the deceased family members estate, accountants that may be hired to help handle the deceased’s bills and other outstanding financial obligations.
Maintain Your Family’s Standard of Living
Having a good life insurance policy as a main bread winner in your family can bring peace of mind that not only the expenses that come at the time of your death will be covered, but so will other large financial burdens. Your contributions to your families income will be replaced with the pay out from your life insurance policy, so that your spouse or loved one doesn’t become the only source of income for the house hold. This is especially comforting if you have children in the picture.
With some life insurance pay outs individuals are able to pay off remaining mortgage balances as well as have finding for other monthly living expenses for a period of time. Allowing your family members time to grieve as well as to have some time to figure out how they will financially manage things in your absence.
Funding of Future Education Expenses
This financial security provided by life insurance can also extend to the future of your children. Life insurance policy funds can also be used to ensure that your children have good financial backing for going to college one day. You spend their whole life saving up money with a dream that your child follows their dreams and gets a college degree to support a career that they love. rest assure that this dream will come true whether you are still around to witness it or not, by having a life insurance policy in place that will help to fulfill that dream in your absence.
Types of Life Insurance
There are two different kinds of life insurance policies out there that you can purchase, called “term life” and “whole life”. You’ve probably heard those words on a television commercial or two over the past few decades, without much explanation with them. So let’s go over those so that you can make the best decision for you and your family.
Term Life
Term life is as the name implies: for a term or set period of time. This option is generally less expensive, and will do a good job of replacing income that would be lost due to your death. That is, only if you were to die during the term of the life insurance policy. Terms are generally 10 to 30 years in length.
Term life is a good option for young families that are just starting out, and can’t afford whole life but want their family to be finically protected.
There’s “level” term life and “decreasing” term life policies. Level term is a type of life insurance policy in which the monthly premium as well as initial pay out amount agreed upon remain the same for the life of the term. While decreasing term policies have a death benefit that decreases through the life of the term while the premiums remain the same. Be aware of which one you are choosing if you opt for term life over whole life.
Whole Life
Whole Life insurance policies are the more common option that people tend to go for, as they last for the life of the policy holder, as the name implies. They cost more in monthly premiums, but what you pay in premiums can go toward the cash value of your policy. Giving you the option to borrow cash against your policy, or surrender it for a cash pay out if one day you are in need. So not only is there a death benefit with whole life, but also a cash savings that is yours as well. Giving you a potential retirement boost.
Whole life might sound like the easier or better option so far, and it is a good option. But there are a few draw backs to be aware of. With a whole life policy, you are paying higher monthly premiums for a similar pay out upon your death as you would get with term life. There may also be penalties you can face with whole life as well as a slower growth rate compared to some term life policies.
The take away here is that there are pros and cons to both type of life insurance policy. The stipulations can vary from one insurance company to the next as well, so be sure to get all of the details from the insurance provider before signing on the dotted line.
Conclusion
Once you’ve reached a point in life that you are caring for people you love, having peace of mind knowing that they will be taken care of if anything happened to you means the world. Choosing between different life insurance policies can be an overwhelming task, with all the different options and variables at play. But now that you have an idea of what the difference between term and whole life insurance is, you can do little more research with a sense of direction.
Helpful Life Insurance Resources:
Nerd Wallet’s break down of different life insurance policies as well as their recommendations.
7 of the Best Term Life Insurance policies according to Forbes.
Leave a Reply