If someone were to ask you what it is you care about most, then you would probably say that it’s your family. Despite this, have you considered what your family would do without you? This is the purpose of life insurance. It’s there to support and protect your family if the unthinkable happens. Your family is depending on you for financial support. This financial support can be provided by life insurance, which will also ensure they can continue living their lives and realise their dreams, even after you pass.
According to Brian Greenberg, founder of True Blue Life Insurance, “Many don’t realise what a good thing life insurance is. Some do, however, as some employers will provide life insurance to employees as a benefit. Even though the insurance works out at only around one year of the salary of the employee, which isn’t going to be enough to provide for your loved ones.”
Good life insurance agents can help people understand the needs of their family and detail the different forms of life insurance that can be used to meet these needs. In other words, the agent helps you understand how much coverage is needed by your family.
There are two main things to consider with life insurance; the cash needs of the family, and the income needs of the family. The cash needs are how much money the family will need right away and covers the expenses of things such as the funeral, any medical bills, and possible attorney fees.
The cash needs can also cover the day-to-day costs you assist the family with; particularly bills. It could be difficult to pay off the mortgage, credit card, and utility bills without your financial help. The Life Marketing and Research Association (LIMRA) is an organisation dedicated to researching, learning, and developing life insurance around the world. It can calculate how much money the family will need to survive before and after the main income earner passes. LIMRA suggests that if you can take care of the cash needs of the family, they might be able to keep living their lives with less income as you were providing them.
The income needs of the family are the amount of income they need as they move beyond the initial cash costs. Good insurance agents can help you determine the right income needs. They will consider the grieving process of your family, and the additional income that they will need while they pick themselves back up. The money might be used to pay off your entire mortgage for example. Income needs also includes the costs for your children, and covers the eventuality that your spouse may want to re-enter the education world.
There are two basic life insurance policies to consider; permanent life insurance and term life insurance. To put it in layman’s terms; a permanent life insurance policy is like owning a home, while a term life insurance policy is like renting one.
Term life insurance is a good choice for people working with a restricted budget, but this doesn’t mean they aren’t as beneficial. The average cost for a 30 year old healthy non-smoking male with a $500,000 life insurance policy is around $50 a month. This is an affordable rate for most people. Even if a client is on some medication or is a little overweight they can still expect to fall into the good risk category for their coverage. This policy provides death benefits if you die during the period if you keep up with your premium payments, but it is similar to renting. The reason is because this is just temporary. Term insurance doesn’t accrue equity or policy cash value. It also comes with low rates, but these rates can increase as you continue to renew the policy.
Permanent Life Insurance
Permanent life insurance is closer to owning a home. Permanent life insurance also provides you with a death benefit, generally in the form of tax free income. The premiums will often be higher than a term policy, but they don’t increase as with term insurance, and they provide a permanent solution. With a Whole Life Policy, for example, people are provided with a whole lifetime of cover without any premium increases. Permanent life insurance policies also build cash value, which can usually be borrowed against if you need a policy loan. There’s no need to pay back the loan either, but the amount of the loan (and interest) will be taken out of how much money is provided in the death benefits. If you avoid doing this it’s possible to use the accumulated money in the policy to pay the premiums and no longer pay them out of pocket. Please note there is some risk to this however. Because you are paying premiums with non-guaranteed policy values, it could result in the applicable dividend scale for the policy being reduced, leaving you with more cash premium payments you need to pay for out of pocket.
There are other kinds of permanent life insurance policies on offer besides Whole Life; such as Universal Life insurance. Your life insurance agent will be able to explain both in detail and give you the information you need to make the best choice for you and your needs.
Never forget that your family truly is one of the most precious things you have in this life. It’s time that you thought about their future. The right agent working for the right insurance company will give you peace of mind and protect your family through the best possible coverage.