How wonderful it is to know that an investment is going to yield and protect the family after you’re gone. Often people are uncomfortable acknowledging that they need life insurance simply because they are uneasy thinking about the concept of death — especially in relation to their own.
Concept of death can be difficult, planning ahead and purchasing life insurance is one of the most loving ways one can show their family, friends and others.
Read More: Why Women Need To Invest In Life Insurance
Why not Life Insurance?
Life insurance often comes into picture when significant financial obligations, a spouse or dependents have nothing to fallback post our departure.
Without adequate life insurance coverage for ourselves, our loved ones could be left swimming in a sea of debt after we are gone.
The next time we sit down to pay bills with our partner, consider: Who would pay for our portion of the mortgage in the event of our death?
What about our child’s activities, clothes, health care and possible college tuition?
Life insurance provides a means to cover these expenses, in addition to medical bills, funeral costs, taxes and more.
This type of coverage also allows us to leave a legacy in the form of inheritance to our children or other beneficiaries, such as a charitable organization, after our death.
Types of Life Insurance
There are two basic types of life insurance — temporary and permanent.
- Term life is considered temporary life insurance as it provides flexible, lower-cost coverage for people who need coverage for a period of time — generally from 5 to 30 years.
- Whole life insurance, on the other hand, is referred to as permanent insurance because it builds up a cash value and affords continuous protection for as long as the premiums are paid.
When compared to whole life insurance, term life insurance offers the most amount of protection for the least amount of money. Term life insurance can also be a less expensive option for families with limited budgets.
The basic idea behind term life insurance is pretty simple: If you die during the time frame specified in your policy, your beneficiaries will receive your policy’s proceeds.
Review Your Policy
Furthermore, in the course of our lifetime, we may want to combine shorter- and longer-term policies to accommodate our family’s changing needs. To ensure we have enough coverage, we should review our life insurance policy with an insurance agent each time we make a significant change in our lifestyle.
Not just when our term expires or our policy is up for renewal. Here are some specific life events that may require an increase or decrease in our life insurance coverage:
- The birth or adoption of a child.
- Marriage or divorce.
- Buying a home or downsizing to a smaller residence.
- Changing jobs.
With Internet scams and mail fraud on the rise, it’s becoming increasingly important that we do our homework when dealing with unfamiliar insurance companies.
Surprisingly, if we receive a life insurance offer that sounds too good to be true, chances are, it is. To verify insurers’ authenticity, look for companies with “A” ratings or better. Or, check prospective insurance companies’ complaint records with your state department of insurance.
It’s never easy to talk about dying — particularly our own death. Practically, it is inevitable and the subject of mortality is much easier to face when we know that our affairs are in order. In fact, many find great comfort in planning the legacy they will leave for loved ones.
3 reasons why whole life insurance is a good investment product
Whole life insurance is an investment option that provides both savings and protection. Since whole life plans do not have a maturity date, you can pay the premiums for as long as you want to. Such policies also financially support your family after your death. Mentioned below are some key reasons why you should invest in a whole life plan.
- Cumulative cash value: Since it offers flexibility in the premium payment, you can build cash value at a fixed interest rate. The interest rate is unaffected by the economy, unlike bank interest rates. Even if the stock market is spiralling down, you can still enjoy your steady returns.
- Passive income: Whole life plans provide dividends from funds that you have accumulated. This provision may vary among insurers. However, if your policy offers this, you can use the funds to invest or buy other policies.
- Access to cash: Unlike other plans, whole life plans give you access to the accumulated wealth without any restrictions. You will still have to pay interest, but it is a viable option in cases of financial emergencies.
To discontinue an insurance policy without affecting its value
It is vital for any family to be covered under a comprehensive insurance policy in order to stay financially protected even after the death of the sole earning member. However, at times the policy owner may feel to discontinue the insurance policy due to certain reasons. But there are certain things that he/she needs to know before closing the policy, otherwise, it may impact the value of the policy.
- A term insurance plan can simply be discontinued by stopping the premium payment. Eventually, the policy will lapse. However, exiting an endowment policy which offers insurance as well as savings benefits is a bit tricky.
- Exiting an endowment plan before its maturity will impact the saved amount. In order to close such a policy, the policyholder should either convert the policy into a paid-up policy by skipping the premium payment after the mandatory period or by surrendering the policy against a surrender value from the insurance company.
- However, in both cases, the policyholder must pay the premium until the end of the mandatory period, which can be 2-3 years based on the terms and conditions of the policy. If the owner chooses to close the plan before the mandatory period, he/she will lose all the value.