Subscribe To This Site
Life Insurance Lesson
Purpose for life insurance: Protect family members One of the main reasons for life insurance is to protect your family members from unnecessary expense when you pass along. Your chosen beneficiary can use the money to pay for your funeral, to payoff a mortgage, or just to pay day to day living expenses. The main purpose is for your family to continue to maintain the standard of living that you helped to provide for them when you were alive. The last thing you want is for your family’s standard of living to deteriorate because of your death. I watched this happen to people where the bread winner dies and the family looses their home and ultimately looses all that the bread winner has accomplished. I have seen families that couldn’t even pay their loved ones burial expenses because of the lack of planning and not at least purchasing enough insurance to pay final cost. Years of security takes just 15 minutes. Get term life coverage with no medical exam. No agent! All online!
Pay burial expenses Life insurance is one of the best ways to pay burial expenses, after all one thing we can be assured of is we are going to die. Therefore, why not plan for this and purchase enough insurance to cover this cost. Many people don’t want to think about dying but it is a fact of life so we should prepare so we don’t leave a burden on our family. I think it’s a terrible thing when family members have to suffer through the loss of a love one and then deal with financial hardship trying to figure out how to pay the final expenses. The cost for a 10 or 20 thousand dollar policy is very reasonable and well worth it to protect your family from the hardship. Pay mortgage Life insurance can be used to pay off the mortgage on your home. There are specific insurance policies that are designed to payoff your mortgage if the insured dies before the loan is paid off. Insurance that pays off you mortgage would payoff the mortgage upon the death of the insured. Personally I don’t like this type of insurance because if you out live the mortgage (which we all hope to do) you’ve just spent a lot of money on insurance that you will never need. Even if you don’t out live the mortgage you are still reducing the mortgage while you are alive so when you die you will have paid both to the insurance company and the mortgage company thus reducing the amount the insurance company will have to pay to payoff the loan. I think it would be better to purchase insurance to cover the life of the bread winner that would allow the beneficiary to payoff the loan if they choose or just keep making the mortgage payments. There are cases where it would be better to have a mortgage than to have a paid off home for tax reasons. I just think it’s better to have choices than to be locked into one option. Some may say if the mortgage is paid off you could always refinance the loan and take money out and that would be correct, however, you would have to pay closing cost on the refinance which in my opinion is unnecessary if you already have the cash in hand. You still have the option to pay the loan off if you are more comfortable owning the house free and clear. I personally don’t agree with that philosophy because I would much rather put that money to work for me earning interest instead of letting it sit idle in my home.Term vs. whole life Whole life insurance covers the life of the insured and has a cash value. So as you make payments part of your money earns interest. You can also borrow against the cash value of your policy. Many insurance agents will try to sell you on the investment value of an insurance policy to entice you to purchase whole life insurance. I totally disagree with this philosophy because the earnings on this money is very low compared to what you can earn from other investments. They will also tell you that you can borrow against your cash value in the insurance and you don’t even have to pay it back if you don’t want to and that is true. But what they don’t tell you is when you borrow against this type of policy you are actually reducing the amount that will be paid to your beneficiary should you die without paying the money back. Just know there is no free ride. Term life insurance covers the life of the insured for a specified time period. Term life has no cash value and you can’t borrow against it. Term life insurance simply covers the insured in case of an untimely death. Term life is usually a lot cheaper than whole life insurance. I like term life because you can afford more coverage for the same money you would pay for whole life and you cover your family in case you die unexpectedly. I also like it because you can get policies that convert into whole life after a pre-determined number of years thus reducing your cost during your younger years when you are likely to have less money to spend towards insurance. You can also get term life policies with increasing premiums or you can get a policy with a level premium. A policy with an increasing premium may be a little less desirable but may be necessary at first just to be able to afford the coverage you need. On the other hand a level premium policy means your premium will remain the same for the life of the policy. RBC Express Term Life Insurance.
Life insurance vs. an annuity As stated above some insurance agents will try to sell you on the investment value of whole life insurance when in reality the only person that win's is the agent because his commission is bigger on a whole life policy than a term life policy. However an annuity while it is an insurance policy it really is more of an investment. The main difference between an annuity and a life insurance policy is if you die unexpectedly an insurance policy pays and the insured comes out ahead. While on the other hand and annuity is insurance that protects you if you out live your life expectancy. An annuity pays you while you are alive and in some instances your beneficiary can receive payments after your death. Annuity Lesson
When should you purchase life insurance Insurance should be purchased based on the needs of the family and the age of the insured. The idea behind purchasing life insurance is to make sure your family can maintain it’s standard of living in the unlikely event of your untimely death. If the family has young kids that are likely to go to college then you need to purchase insurance to make sure there will be money available for the kids to attend college. On the other hand if there is just yourself and a spouse who has a very good job then you just need to worry about enough coverage to replace the income that you are contributing to the regular running of the household. The insured’s age is an important factor because it determines the cost of the premium. Again if you are young and have small kids or are planning a family you will need to think about maintaining your standard of living and allowing your family the opportunity to continue to grow in your absence. Kids will need to go to college your spouse will need to be taken care of until death. Click here to get a free life insurance quote.
Life insurance from your job Many companies offer their employees life insurance at little or no cost. Many times they will offer twice your income at no cost and allow you to purchase up to three times your income for an additional charge. This is a great benefit that protects you in the event of your untimely death. However, the problem with this insurance is when you leave the job you loose your insurance. This can really become a problem when you retire because if you haven’t purchased other insurance you could end up trying to get insurance when you are 65 or over which will be very expensive. You could potentially have and illness such as diabetes which the insurance may not want to cover. I recommend that you have coverage that is not tied to your job because you don’t know what will happen with your job that could leave you unprotected. Many companies are now selling long term care insurance because it's true the fastest growing segment of the population is over 85 and every seven seconds another person in the U.S. turns 50. I found a book that explains the secrets of long term care insurance and I urge you to read it because care for yourself or a loved one is important as we all age. The book is called Insider Secrets To Long Term Care Insurance A Consumers Buying Guide. I know it was very tough when my parents got older and couldn't take care of themselves and I had moved away. I was constantly traveling to help either solve care issues for them or visiting them in the hospital. Fortunately I could afford to do this but everybody can't so you need to think about how you will deal with family members aging as well as your own. I don't profess to be an expert in this area but I do know from experience if you don't plan for it you will have a very difficult time dealing with it when the time comes. This will be very stressful for you if it's a loved one because it's hard enough dealing with the emotional stress of seeing your loved one suffer but to have to deal with the financial hardship or frankly just the inability to help them can be devastating. Please take the time to read and learn as much as you can about how to protect yourself and your love ones during the toughest times of your life. I encourage you to start by reading Insider Secrets To Long Term Care Insurance Life Insurance Books From Amazon.ComAmazon has some great books that I would encourage you to read before you run out and purchase insurance. Insurance to protect your family is necessary but you need to make sure you are properly covered and not over or under covered. Home Retirement Finance Lesson Click Here!to get federal grants to help you buy a home, start a business etc... |
