You have carefully laid out the best of plans for your family. You’ve built up a healthy emergency fund and you’re living comfortably below your means. You’re paying yourself first and investing a healthy portion of your income. Everything is going exactly according to plan.
Then one day you swing by the deli to pick up a cup of coffee and an egg sandwich. You step outside and unlock you car door and BAAM! Out of nowhere a car jumps the curb and mows you down where you stand.
Just like that…you’re dead. All of your plans go right out the window. How will your family go on? How will they survive?
If you made life insurance an integral part of your financial plan then your family will be well taken care of. However, if you neglected life insurance or treated it as an afterthought then the consequences could be dire.
Without enough life insurance to covers funeral expenses, pay off debts, and support themselves, your family might be forced to make tough decisions and sell assets that you had planned for them to keep or pass down to their descendents.
Why is it that some people think they can do without life insurance?
Do they think that they are immortal and so have no need for life insurance? That’s a pretty immature and irresponsible attitude. After all, we’re all going to die someday.
Maybe they think they can do better by investing the money in the stock market. But they would have to earn an unrealistic rate of return in order to beat what they could get through relatively cheap life insurance benefits.
A more likely explanation is that people just don’t like the idea of life insurance because it reminds them of their own mortality. They figure if they don’t think about life insurance they won’t die. Unfortunately this just isn’t so.
If you want to protect your family’s assets and allow them to continue living their current lifestyle after you’re gone then life insurance is a must.
There are two basic types of life insurance: term life and whole life.
Term life insurance covers you for a term of up to 30 years. If you die within the term of the policy your beneficiaries will be paid the full face value of the policy. Look for a policy that offers guaranteed renewal without a medical exam. This will allow you to renew the policy at the end of the term even if you should become sick and uninsurable during the initial term.
As the name suggests, whole life insurance is permanent and covers you for your whole life as long as you continue to pay the premiums. It also includes a cash value amount that builds over time and can increase the overall value of the policy. The problem with whole life insurance is the premiums are generally much higher than term, and whole life policies are often riddled with costly fees.
While whole life insurance policies might be better for some people, some unethical insurance agents try to push all their clients into whole life so they can earn commissions. For most people, term life is the less expensive and more sensible life insurance option.