It’s common knowledge that life doesn’t always turn out the way you want it to. Unexpected accidents, deaths, injuries—they’re all part of the curveballs life throws at you. That’s why it’s no surprise that the global life insurance market is expected to grow by 4% by 2019.
Despite the importance of life insurance, there’s still quite a confusion regarding the importance of it. Many, due to certain misconceptions, are not sure whether it’s a good idea to invest in a policy. To set the records straight, we’ve curated a list of reasons to help you understand the value of life insurance and how crucial it is to safeguard your future, even if you’re in the pink of health.
Replacing Lost Income
There’s no easy way to say this, so let’s cut to the chase. If you die unexpectedly and you have a family that depends on you, life insurance is your solution. Why? Well, with the adequate coverage, your family will receive financial security from your insurer, which will help cover monthly bills. Besides replacing lost income, it will also provide a safety net for your spouse in case of your untimely death.
There are several types of coverages available, depending on what meets your requirement and what you think is needed for the future.
If you have borrowed money from the bank to pay for your home or your car, your insurance will cover this as well after your death. This way, your family won’t have to stress about clearing your debts, however big or small the amount.
Your financial liabilities like home loan, personal loan, auto loan, and even credit loan is immediately covered by your life insurance. In addition to providing your family with a regular stream of income, insurance also assists them with the repayment of these debts.
Covering Burial Expenses
Even the most basic funeral service is expensive these days. This also depends on the type of service you want, depending on your religious beliefs. The costs can keep adding up and this will burn a hole in your family’s pocket. With life insurance, they won’t have to stress about shelling out tons of money for the funeral and focus on saying their goodbyes.
Some insurers also offer a pre-payment option, allowing you to pay for the funeral in advance so your family can rest easy on the day of.
Paying Your Children’s Education
Life insurance schemes is designed to address short-term as well as long-term needs. Your child’s desire to go to college falls under short-term needs and in case of your death, the insurance money goes towards their education. The coverage pays for things like tuition, rooming, and more. It’s ideal to take life insurance if you have life insurance so your children won’t have to worry about missing out on college and getting burdened with student loans because of unexpected life events.
Managing Your Business
Life insurance is more than just addressing your family’s needs. There are some insurers that provide policies that will finance your business when you pass away. For example, if you purchase term insurance, you will receive protection for a fixed term from your insurer. All the benefits will be paid for during this period in the event of your death. There’s also a policy that lets your business partner purchase your shares and the payout goes to your family instead. This is usually referred to as a buy-sell agreement.
Securing Your Retirement
Life insurance isn’t limited to providing a financial base for your family. With the right life insurance policy, you can also secure your retirement easily. There are various ways of doing this. First, you can create an emergency fund and then you can protect your income by choosing a disability insurance policy as well.
You can also set up a tax-advantaged retirement account as a part of your portfolio. Under this account, you can choose either index funds, exchange-traded funds, or a target date fund. Some insurers will also offer you investment options to choose from.
Considering that life insurance is a form of financial investment, you can also save taxes on certain policies. However, the non-deductible amount varies from country to country.
With life insurance, you can also settle your estate taxes in the event of your death. For instance, if your family is presented with a heavy tax bill, they can use the insurance money to pay the taxes. It is advised to increase your coverage if your estate grows, especially every three to five years. This way, your family won’t have to bear the burden of clearing these taxes as well.
What to Keep in Mind
The Risk Factor
Now, there are certain things you should keep in mind if you’re considering life insurance. These policies thrive on uncertainties and it is advised to purchase a policy sooner than later. For instance, if you’re healthy now and have a steady income, it will be easier to pay the premium for your insurance. However, if you get sick and are required to stay at home, you will not be eligible for a life insurance policy.
Your Age and Health
Insurance policies also tend to be more reasonable when you’re younger. If you’re in good health, you’re probably wondering why do you need to invest in this. Life is uncertain and it’s always good to be backed by insurance when things go awry. And coverage costs are much lower when you’re younger and single.
Understanding Your Requirements
Before investing in a policy, it is crucial to do your research and understand how much coverage you require. It’s also important to consider the assets you own, their value, and your debt, f any. If you’re single but have dependent parents, there are policies to suit your needs. The same goes for those with a family, those with a retirement plan, and those who wish to invest.
Not Falling for Just Any Other Policy
Getting a life insurance policy can be overwhelming and some agents will try to sell you a policy that doesn’t match your requirements. Which is why you should understand the market and plan out your finances before signing up for any policy.