No one wants to think about it, but life insurance may be one of the most important decisions you make when it comes to protecting your loved ones from financial hardship. While most types of insurance - car, travel, pet - can be adjusted after an accident or before your next trip, life insurance won’t be flexible after the policyholder has died. And beneficiaries won’t be able to receive anything that isn’t listed as available.
Here are three critical reasons to enroll in a life insurance policy, or maybe even expand your current coverage, before it’s too late:
Provide your family with financial protection.
Even if you have savings, it’s unlikely to be enough to cover your family’s needs for several years or even decades in the event of your loss. Life insurance delivers a specific amount of money to your beneficiaries immediately upon your death. And generally, this is not subject to federal income tax.
There are generally three types of life insurance:
Term Life Insurance: The simplest form of life insurance. This policy provides coverage for a set period of time, usually 10, 15, 20, or 30 years, and if you die during that time, a cash benefit is paid to your beneficiaries. The coverage expires at the end of the term, but these policies often offer optional riders that allow you to renew or convert your policy.
Whole Life Insurance: This policy provides guaranteed lifetime protection, as long as you continue to pay the premiums. It also has a cash value component that can grow and be borrowed, though any loans or withdrawals could be subject to tax and may reduce the value of your coverage.
Universal Life Insurance: This coverage is a flexible long-term option, and similar to whole life, can build cash value. You will be able to adjust both your policy and your premiums as your life changes. However, this policy does not come with a guaranteed death benefit. If you fail to adequately fund it, this policy can end without any death benefit to your loved ones. Still, this is generally seen as the most long-term protection and most flexibility for the least amount of money.
Pay off your debt.
Outstanding mortgage, student loan, business, or credit card debt is the last thing you want your loved ones to be burdened with in the event of your death. But those outstanding balances don’t disappear after you’ve passed, and without a policy in place your family could be held responsible for repayment. Luckily, you may qualify for a plan that could cover what remains on your mortgage, any student debt, and more.
Maintain your family’s standard of living.
When choosing the right amount of life insurance to purchase, it’s important to think about what you consider necessities or important comforts, and how your family’s standard of living may be impacted. While a plan that protects them and pays off your debts is great, a plan that does even more could be better. Mortgage and loan payments aside, without your income, would your family be able to maintain their standard of living? If the answer is no, you’ll want a policy with enough coverage to keep them comfortable and help cover additional life expenses—like clothes, car expenses, pet care, regular bills, and groceries.
Find the right coverage for you.
Life insurance is a vital part of responsible financial planning that will keep your loved ones protected after you’re gone. And as your life changes, your life insurance needs probably will, too. Let us find the right policy for you and your family. Contact your local independent Cushman Insurance agent today to learn more.
Sources:
Why is life insurance important? Forbes. https://www.forbes.com/advisor/in/life-insurance/why-is-life-insurance-important/
Why life insurance is important to have. CBS News. https://www.cbsnews.com/news/why-life-insurance-important-to-have/