Life insurance is not something the average person thinks about early on in life. We all think we are invincible, yet we have all heard the horror stories of a family unexpectedly dealing with the early passing of the “bread winner” of the family. Not only does he or she leave grieving family members behind, but there is also often a significant debt load, not to mention the costs of burial.
Why Buy Life Insurance?
Regardless of your age or marital status, life insurance is something to be considered immediately. What most people do not realize is that there is some type of policy available regardless of your budget. In some cases, just a few dollars a month will provide peace of mind for both you and your loved ones.
So, why do most people buy life insurance? Four of the most popular reasons are:
• Funeral costs – today, even an inexpensive funeral will cost over $5,000.
• Business partner protection – just how will your business be affected if you pass on? What type of security can you provide for your partners to help protect them if this happens?
• Securing family finances – how will your family be able to survive without your income? A well-thought out policy can help cover their costs for many years to come.
• Educational costs – the cost of college tuition continues to rise. Whether you have children or a spouse that may need to return to school, your policy can help cover these costs without affecting the daily budget of the household.
What Life Insurance Policy is Best for You?
There are three basic types of policies (please note, there are others, but these are the most popular): Term, Variable, and Whole.
• Term – this is by far the most popular type of policy, mostly because it is the cheapest. You can hardly sit down and watch your favorite TV show without seeing a commercial offering some type of term coverage to a specific age group. This coverage offers a low premium over a specific amount of years. The trade out for the lower premium is that at the end of the policy “term,” the policy is terminated with no return on investment (unless, of course, the insured passes away during the term of the policy).
• Variable – unlike term, variable policies can cover the insured for his or her entire life and provide investment potential. These policies will cost more, but will also increase in value over time. However, because this insurance is tied into investments, a market down turn could actually decrease the value of the policy.
• Whole – this is a popular type of policy with individuals that are financially secure and looking to complement their investment portfolio. This is generally considered a low-risk investment as well as providing an asset that can be borrowed against if need be.