Do I really need Life Insurance?
But there are several reasons why you should consider buying life insurance. It offers a level of protection that few other investments can give. To determine what kind of life insurance is best for you, we first need to define the two primary types of life insurance.
Term Insurance
Term life insurance offers no face value to anyone except the beneficiary in the event of the insured’s death. Your premiums are usually re-evaluated every year and can go up from time to time. But no matter how high the premiums get on a term life insurance policy, it is always cheaper than a whole life policy.
Whole Life Insurance
Whole life insurance has some significant differences from term life. Whole life premiums never go up and, as long as you pay your premiums, the policy is in effect. Part of a whole life premium is an investment account that appreciates in value as you pay your premiums. The insured can take out loans against the cash value at any point and for any reason.
Another feature of whole life is the ability to borrow against the death benefit. If the insured needs to pay a significant expense such as a home repair or a child’s college tuition, then the money can be borrowed against the death benefit of the whole life policy. As long as the policy is in effect, the loan does not necessarily have to be paid back. But if you do not pay the loan back, then it comes out of the death benefit when you pass away. For example, if you borrow $100,000 against a $150,000 death benefit to buy a home and never pay the loan back, then your beneficiary would only get $50,000 upon your death. The loan would need to be paid back if you canceled the policy.
So why would you need either of these life insurance policies? There are very good reasons why you should consider buying both term and whole life insurance policies while you are still in good health.
Protect Investments
When you buy a home, start a retirement fund or start saving for your child’s education, you do so under the impression that you will be there to see those things through to the end. But what if something were to happen to you before you finished saving?
A term life insurance policy is an inexpensive way to protect your child’s college savings, make sure the family home is paid for if something were to happen to you while the mortgage was still in effect or help your spouse to see your retirement plans through even if something were to happen to you.
A 30-year term life insurance policy on a 30-year mortgage will make sure that your spouse and children do not lose the home if something were to happen to you. If you put a 20-year term life insurance policy on your child’s education fund, then you can make sure that your child receives the education he needs even if you are not there.
Estate Planning
A whole life insurance policy is an excellent way to ensure that your heirs get your estate without having to worry about legal problems with a will or other potential issues. You can use the death benefit and investment portion of whole life as an estate planning tool that will give you a safe place to invest your money while preparing for the future of your children. The death benefit can be seen as added value to an estate that can grow with the investment gains of a whole life policy.
Life insurance may not seem like something that is right for you or your family. But if you have any kind of investment or income that is worth protecting, then you need to look into life insurance.
View the original article here
