Life insurance is something that everyone is better off having, as it assures financial help in case of a loss. However, the truth is that very few people get it. It’s easy to put things off when you’re in good health with a long life ahead of you.
However, the coverage protects your loved ones when the unexpected occurs.
While it may seem like something you don’t have to worry about right now, you cannot ignore the advantages. We’ll list out a few reasons why you should buy one and a few tips for shopping policies.
Top 10 Reasons To Buy Insurance
1. Provides Substantial Income
Losing a loved one that’s responsible for most of the family’s income can lead to drastic changes. It could mean that those left behind get into debt or a situation where they must sell their house and other belongings.
With life insurance, the coverage will pay for the immediate expenses and act as a financial safety cushion for the family. They’ll have a guaranteed lump sum or gradual income from the policy’s benefit.
After death, the family’s daily needs will continue. That means paying for food, maintenance, utilities, and other costs.
They will still need money for all that, and life insurance has a death benefit to help.
It can be a way to cover bills and other things as the family adjusts. It gives enough time for everyone else to prepare and transition after the loss. There are three types common among all companies:
- Term: Term life insurance lasts anywhere from 10 to 30 years, expiring at the end of it. It provides assured coverage from that period, and there is also an option to renew or convert the policy later.
- Whole: Whole life insurance does not expire as long as you keep paying. One of the advantages of it is that it has the potential to grow because it has an equivalent cash value. You can also get loans or withdrawals, considering penalties and taxes.
- Universal: Universal life insurance is similar to whole life, and its cash value lasts for a lifetime. The difference is in its flexibility to change the premiums and benefits. You can add payments or lower them if necessary.
2. Pays Off Debt
Certain debts will stay with the family even after the death. For example, they may still need to pay mortgage costs as they haven’t completed payments yet.
They may need to sell other assets or the house when they cannot make a payment. The money to pay for these debts will affect their other expenses.
The money from life insurance will cover debts for a while and can even be enough to pay substantial ones. A mortgage is only one example, as other obligations that can move to the family can include:
- Credit card debt
- College loans
- Personal debt
- Credit card debt
- Business debt
When one or several of those come knocking, the family will begin to feel the financial loss. With insurance, they may never have to deal with it or pay enough until they can find a solution.
3. Covers Burial Expenses
Burials are expensive, especially if you haven’t prepared for one. You’ll have to:
- Buy land
- Hire a funeral home
- Pay for casket costs
People don’t often think about it, much less prepare for it. The large sums that come with it can put the family in financial distress if they don’t have much left.
Life insurance guarantees that there will be money to pay off all the expenses. Some policies have burial expense coverage, meaning the family will no longer have to worry about it.
Getting one can free them from that burden.
4. An Alternate College Fund
Life insurance can become an added supplement to expenses like education funds. Even if the children already have a growing 529 plan, a death benefit is substantial enough to cover many needs.
It can be a way to pay tuition or at least provide additional money that the children will need.
One way to use it is to become a supplementary payout that works in tandem with your savings. The children will get a portion of that as a part of their allowance.
There is a potential to eliminate or significantly minimize their student debt because of the benefit.
5. A Withdrawable Income Source
If you have insurance with cash value, that means the money you have is an alternative income source in case there are times you need it. These are usually available with lifetime policies that have you paying consistent premiums.
As you continue to pay, the money adds up to a point where you can tap on it when needed. It can be a way to cover other financial emergencies.
Of course, you should remember that there are some limits to your withdrawals depending on the policy. Some may cancel the policy or have tax penalties, which lowers the amount of money you can get.
Make sure you understand the terms within policy withdrawals to maximize its benefits.
6. Tax Free Death Benefit
One of the distinct advantages of life insurance death benefits is that they’re tax-free. There is no longer any additional charge during the claim, meaning your family will get its value.
That can be a difference maker as other investments may lose anywhere from 10-30% of their value during the withdrawal. It acts as a financial safety net, with guaranteed protection offered by these products.
7. An Investment Tool for Diversification
Most life insurance policies also act as investment tools that grow over time. They tie to a specific product, and you’ll know more information in the fine print.
A policyholder can even receive payments if these investments are performing well. However, going into this type of insurance also comes with risk — as with any investment.
Sometimes, you won’t get anything yet, as the value of your money may temporarily go down in volatile market conditions.
You’ll find that most of these investment types tie in directly to universal life policies. Since you are paying for them continuously, they act similarly to retirement funds and the like.
However, they still act as life insurance, providing a guarantee. You also have control over the investments they connect to, as you can choose the product you like.
8. Controlled Payments
A life insurance policy has a lot of flexibility with payments. One of the most common excuses people make is that they cannot afford to get one. However, the truth is that most coverage is affordable to make them accessible.
If you want to save more money, you can opt for term life insurance, which has a lower premium threshold — though it has an endpoint.
Some insurance plans even have around $1 a day coverage. You can pay this by month or year, depending on your preference.
The only time premiums tend to increase is if the company discovers something that leads to more risk to your life. For example, people with preexisting conditions or habits like smoking tend to pay more for their insurance.
9. Peace of Mind
Having one less worry can be a load off your shoulders. Often, income earners concern themselves with everyone else’s capability if they cannot work anymore.
While no one can predict the future, life insurance acts as a guarantee that your loved ones are prepared. Even a smaller policy will help you sleep better at night and ensure they’ll have the money they need if the unexpected occurs.
10. Tailor Your Policy Through Riders
A rider is an optional feature you can add to your policy to make it fit more with your goals and preferences. For example, you can add more protection aside from life by adding a rider that covers your property.
These are very flexible and need no underwriting if you want to add or remove them. A rider many people get is additional coverage for family members like children.
They can also help if you’re foreseeing other expenses. Life insurance can potentially help in dealing with chronic illnesses or disabilities
If you think of it, there is a high chance that a policy provider can make a plan that fits your needs.
How To Shop for Life Insurance (Tips for Finding the Best Policy)
There are many life insurance policies available, but you need one that fits your goals and needs. The two things you need to balance are your goals and your income.
You can only pay a percentage of your money towards the premium, so it must be affordable. At the same time, it should provide the guarantee you need, like the death benefit or any possible living benefits.
- Check insurance companies’ websites to get more information about their policies. You can also call them to inquire, as many will be willing to answer your questions.The more detail you can bring out, the easier it will be to decide when you want one. One good thing about today’s technology is that these companies are now accessible. You don’t have to spend an entire day going from company to company to learn about what they’re offering.
- There are even tools like a benefits calculator to give you a clearer picture of what the beneficiaries can get. Other platforms collect data from different companies to help you compare each offer.
Getting life insurance early in life usually comes at a lower price. These customers have lower rates because the insurance company sees them paying premiums for longer.
Even if you’re no longer in your 20s, there are still many ways companies can make it more affordable. However, doing homework is necessary if you want to discover these policies.
You may not be able to get all the information right away, but shopping for the right insurance plan doesn’t have to be a rush. You can pace yourself, knowing you and your family will benefit once you have a great one.
“If a child, a spouse, a life partner or a parent depends on you and your income, you need life insurance” – Suze Orman
Even with all the information online and offline, getting a professional still provides a distinct advantage. Professionals know how to manage these insurance plans and have designed many custom ones to help clients.
There are times when the available policies aren’t enough. You have to get someone who knows how to navigate and customize life insurance policies.
They’ll also be able to explain to you what each company is offering and provide an unbiased perspective. That doesn’t happen when you are talking to someone representing a specific insurance company as they have to promote its products.
An expert can tell you what’s better for your goals and what fits your income more.
Get More Out of Life Insurance With 121 Financial Credit Union
One of the advantages of being a member of 121 Financial Credit Union is you get all the help you need for insurance planning. Unlike traditional institutions, we function to help you reach your financial goals first and foremost.
To that end, we offer products and programs you may not find anywhere else. With our help, you can get the expertise you need and set up a life insurance plan that gives you peace of mind.
We also help with many other services, from setting up accounts to loans. We’re here to serve you.
Contact us today and speak with one of our team members. We’ll help you start a membership, and you can begin your path to getting life insurance.