Why Investing in Life Insurance Doesn’t Have to Be a Burden
The idea of one’s mortality is a topic that can cause many people dread, but should accept as a practical concern and not put off for later. The truth is that there are factors that even the most cautious people cannot control. Some illnesses are undetectable until a critical stage, while accidents happen left, right and center.
The plethora of choices in life insurance can be overwhelming and difficult to digest right away. However, it does not have to be a burden. You only have to ask yourself a series of simple questions to gain a sense of what it is that will benefit you the most.
Why do I need life insurance?
Some people can whiz by without having insurance to back them up, but as long as you have dependents, i.e. a spouse, children, elderly parents, subscribing to a plan will protect them when you pass. We are of thee opinion that debt is shared by married couples, which means that even in your passing, your debt doesn’t die with you. It only transfers to the partner you left behind. Being financially prepared with the best life insurance plan can save your family from falling into serious debt.
How much do I need?
There isn’t a standard amount, as it varies depending on someone’s streams of income, number of dependents, debts, and lifestyle. A general rule of thumb that Nerd Wallet deems more applicable in today’s world is the comprehensive DIME formula which takes into account a person’s current and potential debt (D), income (I), mortgage (M), and children’s education (E).
Insurance is a consideration even when your spouse has a personal income because most households are a combination of a two-person salary. Without insurance, the loss of your income will leave your husband or wife with the burden of making up for what you used to contribute.
You should also take into account your present lifestyle and related plans. Health IQ explains that premiums can also be customized according to your current and future needs to give a general idea of how much you’re going to have to pay. Overall, what makes life insurance less of a burden is making it a component of your overall financial map instead of an optional expense.
What type should I get?
Understanding the types of life insurance makes the entire process less daunting. The Balance gives a brief overview of the two basic types of insurance that you should consider: term life and whole life insurance. Most people choose to go with a term life policy because it is generally the cheaper option. You have to choose the number of years to cover you which means that you’ll have to renew your policy at the end of the term. Whole or permanent life insurance, on the other hand, is a lifetime policy but is definitely more expensive. Because you’re paying for a higher premium, the policy is also more comprehensive which means that there won’t be any surprises down the line.
Knowing the two basic types, you shouldn’t dismiss one over the other just yet. Consulting with a professional is still the next best step. You will gain clarity on whether having a bigger coverage for a shorter amount of time or a lifetime guarantee is more beneficial for you and your family so it’s important that you consider all your options before purchasing life insurance.
What do I get out of it?
Your beneficiaries can use the money not just to pay off outstanding debts such as medical bills, but also to ensure your children’s education, cover day-to-day expenses, or even serve as their inheritance. Depending on your policy, life insurance can also serve as a retirement fund so the latter portion of your life won’t be spent overworking or still worrying over bills. Ultimately, you can think of life insurance as your way of taking care of your family even when you’ve passed.