Life insurance provides peace of mind, knowing that loved ones will be financially secure if something were to happen to you. There are a few considerations, both regarding the various types, and also some reasons why individuals take out a life policy. We hope this article helps make the decision easier if you find yourself asking the question, “Who needs life insurance?”
Term Life Insurance
This type of insurance offers coverage for a set period of time — typically 10, 20, or 30 years. Coverage expires at the end of the term. However, most term life insurance policies also offer optional riders that could allow you to renew or convert your policy. This can be valuable for a family or business that has future financial responsibilities such as living expenses, education needs, mortgages or business loans.
Whole Life Insurance
This variation doesn’t expire as long as you continue to pay the premiums. It offers a cash value component that has growth potential. You also can borrow against the cash value, but loans or withdrawals may generate an income tax liability. This results in a reduction of the cash value and death benefit, causing the policy to lapse. Additionally, loans will also accrue interest.
Variable Life Insurance
Paid premiums keep this policy active with no expiration. Stock market investments can grow based upon the cash value of these policies. This provides the potential for greater returns but also carries the risk of decreasing value that whole life insurance does not.
Universal Life Insurance
This type of life insurance is similar to whole life because it does not expire as long as you continue to pay the premium and has a cash value component. With a universal life policy, you typically have the flexibility to adjust the premium and death benefit. The cash value in the policy must be sufficient to cover monthly charges if payments drop below the set amount at time of issue. This also applies for any premium non-payments. Additional premium payments may need to be made to keep the policy in force. Increases in coverage are also subject to underwriting.
FINANCIALLY PROTECT LOVED ONES. Your income likely helps support your family’s needs and therefore, losing it would cause a great deal of financial strain. Groceries, utilities, housing, property taxes, outstanding loans, and health care bills are just part of a typical monthly budget. In the unfortunate event of your passing, these expenses do not go away even if your income does. When thinking about why you need life insurance, many everyday purchases fall under the radar.
ESTATE PLANNING AND DEBT MANAGEMENT. Loved ones are left to work with the estate after your passing. Additionally, many debts do not go away and are transferred to family members. Some examples of these debts are credit card, business, and/or personal loans as well as student loans and property mortgages. This being a very difficult time for your loved ones, having life insurance can make dealing with this debt less stressful. Consequently, this can allow your family to grieve without worry.
SAVINGS AND INVESTMENT OPPORTUNITIES. Whole life and universal life have a savings component, thus making them investment vehicles. This can aid you to save for retirement or other long-term goals. This could include large commitments such as helping to cover post-secondary education costs for your children. We all know that things like college is expensive, and these costs are only increasing. If one of your goals is to help pay for your child’s college or wedding or even their first house, this will help you achieve that goal.
PEACE OF MIND. Funeral planning can be a very personal thing for a lot of people. It can also be something that can be costly. Life insurance can reduce the stress for a family having to plan an unexpected funeral. Being able to take care of the cost of a funeral as well as abiding by the loved one’s funeral directives can reduce stress for a family as well as potentially remove the risk of any financially-charged arguments during a very stressful time.
To learn more about life insurance or our other life & health insurance services, contact Mike Lewis or any one of our life & health insurance agents today! Reliable Agency, Inc. has offices in Cloquet, MN, Hermantown, MN and Superior, WI. Let us help you live life more joyfully!