Life insurance policy is a contract between you the insured and an insurance company.
The terms of the policy require you to make premium payments in exchange for your beneficiaries getting a lump-sum payment when you die or at the end of a period.
Life insurance is mostly misunderstood and the majority of people who don’t buy it don’t understand the need for life insurance. So, why get life insurance?
We all don’t know when we’re going die. It is therefore important that you plan for it, the same way you do for our auto insurance just in case you get into an accident.
Everyone should have life insurance but lets first explore the types of life insurance policies.
Whole Life vs Term Policy
As you ponder on why get life insurance, it is important to first understand the difference between the two policies.
The word term implies that it’s for a fixed period hence a term life insurance policy is for a fixed period of about 5 years.
Whole life policy implies that the insurance policy is for your entire life.
On the whole life policy, you get both a living benefit and death benefit but term policy is only for a death benefit.
When you buy a whole life policy and it builds cash value as time goes by. Basically, you are investing in yourself and you can take the loans from it once there’s money in the policy.
The premium in a whole life policy is fixed for your entire life or the period you are going to be alive.
You can buy the term life policy in terms of 5, 15 or even 30 years. Once the term ends you are going to be rated at a higher age.
Insurance rates are quoted through morbidity and mortality hence the term policy is cheaper the younger and healthier you are.
According to age, the premium that a forty-year-old pays is a lot more than 20-year-old pay for the same policy.
You have to be cognizant of your age because once that term is done under on the term policy then the monthly premium will be much higher than when you actually started.
Probably you were paying $20 a month for a five-year term, but when it’s done you are required to pay $120 a month.
This is the reason why most people don’t keep the term policy. However, most companies have a conversion privilege where between the first year and the fifth year of a term policy you can convert it to a whole life policy.
Why get life insurance? Here is your guide.
To Protect your Loved Ones
This is the most obvious and key reason why you should get life insurance.
Life insurance is all about planning ahead in light of the fact that you have loved ones that you want to protect financially in case anything should happen to you.
If education is a part of that then college planning definitely would be involved.
The expenses of a mortgage, food and other necessities are going to need to be paid for.
For Planning Purposes
The other reason would be for retirement planning, tax planning and estate planning purposes.
There are multiple uses of a life insurance policy and to cover any taxes owing upon death or during retirement is a very smart use of your life insurance policy.
In corporate planning, it is used if a company has a key employee that they need to make sure they will be financially viable in case something happens to that person.
If there are multiple partners in a company, they need to protect each other financially to have money available to purchase shares from a partner’s estate if something were to happen to one of their key shareholders.
These are some reasons that may trigger the need for life insurance.
Why Get Life Insurance?
You know that nothing can replace a father, mother, husband or wife but what life insurance can do is replace the economic value of human life.
The age-old question remains, why get life insurance? Invest in it today and reap the benefits.
For more information, contact us.