WASHINGTON, July 2, 2013 – This 4th of July, when you sit back with your loved ones and watch the bombs bursting in air, will you be celebrating your financial independence along with your nation’s independence? Nobody likes to think about the particulars of life insurance, but once people realize the financial freedom that a life insurance policy can provide they realize that waiting can be a costly mistake.
Life insurance policies can benefit individuals across the spectrum; from those who only want to cover funeral expenses to those who wish to provide their families with continued and substantial support long after their death.
Many people do not realize just how many expenses need to be covered on a month to month basis, and if the pay checks stop coming in any savings could be tapped out faster than your family can plug the holes.
Mortgages, credit card loans, student loans, car payments, utilities, health insurance payments, school supplies, groceries, clothes, gasoline, tuition, and perhaps in risk of sounding like a cliché, the list goes on.
As you can see, the loss of income can drastically affect a family’s future beyond what you’d normally think. The list doesn’t even include medical or funeral expenses that can be an instant strain on the family during and after a tragedy.
Many people get turned off by life insurance because the whole process can seem confusing, or because they think they’re too unhealthy to get a good rate or that it will be too expensive outright. But the truth of the matter is that many policies end up costing less than what you’re paying for Internet or cable each month, and they can offer hundreds of thousands of dollars in protection.
While life insurance should rarely be used as an investment vehicle, it serves very well as a protector for your family and you can customize it depending on your needs. If both spouses in a family make enough to cover everyday living expenses, a life insurance policy on both could help pay for large future investments such as college tuitions and car payments. Lower income families would need the insurance for more everyday purchases like groceries and rent.
Of course, you only need life insurance when you actually have something or someone you want to insure. Nine times out of ten this will be your dependents. But life insurance benefits can go to virtually anybody or any organization that you see fit. If you do not have any dependents and are comfortable with your savings then there really is no need for life insurance.
If you have decided that you do want a life insurance policy to protect your family’s income, you have some choices to make to reach your goal of financial independence. The biggest choice is between getting a whole life or a term policy.
As the names suggest, the two policies differ based on the amount of time they protect you. Whole life extends throughout your life, while term life policies protect you for a fixed amount of time. This amount of time varies based on your needs but 20 and 30 year policies are the usual. Term life policies are much cheaper than whole life because there is no guarantee that you’ll collect benefits (after the policy’s time limit runs out, of course.) This makes term policies much more accessible to middle income families, although in the end, they carry no cash value provision like whole life.
For most families, though, this kind of protection is a golden parachute should the breadwinner die before his actuarially-alloted time, as a term-life death benefit can help for years down the line rather than just covering funeral expenses and the like. Of course if you only need to cover smaller expenses, then by all means take out a smaller and cheaper policy.
Financial independence means different things for different people, but there is one underlying thread running through it all. Life insurance is designed to help you sleep better at night knowing that your family will be taken care of. It doesn’t matter if you’re covered for $10,000 or $500,000. If the policy helps to take the weight of the world off your shoulders then it’s a good investment for you and your family.
(Header photo by Pam Roth.)
Liran Hirschkorn is an independent life insurance agent licensed nationally. He helps everyday Americans find the coverage that fits their needs and specializes in high risk life insurance, helping those with pre-existing conditions qualify for coverage.