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Why Life Insurance Is Necessary For You and Your Family ?

  Sanjiv Gupta CPA  Published 
Why Life Insurance Is Necessary For You and Your Family ?

As people grow older, marry, start families and engage in businesses, they realize that life insurance is a crucial part of a financial plan. It depends on the kind of policy that they sign up for. Life insurance can be cheap, so there is no excuse to not sign up for one. Through the years, people will find comfort knowing that there is money for their loved ones just in case curve balls are thrown, and unexpected events such as the individual occur.

1. Protecting Loved Ones and Family

Loved ones depend on the financial support of their livelihood. This is reason enough to press on the importance of life insurance. This replaces the income of the insured once he or she passes. This is also very important for the parents of young children or adults who would regard it difficult to sustain the standard of living that they have grown accustomed to if they have no more access to the income that the departed provided in the past. They need to provide money that is enough to cover the costs of taking care of the members who remain alive.

2. Leaving an Inheritance

Even if the individual has no assets to leave to their heirs, they can create an inheritance just by buying life insurance policies and listing them as beneficiaries. This is an excellent way to set up the kids for a financial future that is very solid and can provide them with the monetary needs that are required once the necessity arises.

3. Paying off Debts and Other Expenses

Aside from providing the income to sustain daily expenses, a family needs insurance in covering outstanding debts such as credit cards, mortgage, and car loans. There are other expenses that include the burial and funeral costs which can also run into thousands of dollars. No one wants their spouses, children, parents or loved ones left behind with financial burden along with the emotional burden that they are already going through.

4. Adding More Financial Security 

Like most parents, the insured individual finds comfort in knowing that their kids are well taken care of especially when they are gone. They want them to get a good quality college education and also provide them with the necessary ventures such as marriage and starting a business. This is the very reason why additional coverage is a necessity especially when the kids are still living at home.

5. Bringing peace of mind

It is hard to tell when people are destined to pass away. It can be today, a day from now or in 50 years. It will happen one way or another, and no amount of money can replace the person. More than anything, life insurance helps in protecting life's uncertainties. Without a doubt, having life insurance also brings loved ones the peace in mind that are needed especially in those trying times. It is also one thing that they can be sure of and have no questions regarding who will take care of them the minute they are gone. Life insurance can also protect the heirs from the unknown and assist them through the loss.

It's not fun to talk about life insurance because it is not a process that anyone enjoys. However, just like death and taxes, buying life insurance is quite a crucial part of life and an essential element of sound financial planning. Some people are aware that they needed life insurance but based on the experience of most, some individuals procrastinate until there is a life-changing event that drives them to buy it. However, there are serious benefits to investing in insurance early in life, especially if the individual is in debt, married or planning to get married, have or starting a family or an entrepreneur.

How Does Life Insurance Work?

How life insurance works are quite simple. You can use it, or you can lose it. The insured individual pays a yearly premium because it is determined by the insurance provider. If the insured died during the duration of the policy (usually it is 20 years), the beneficiary collects the specific amount that is indicated and written on the policy. For example, assuming that the insured individual invests in purchasing a $1 million, 20-year term policy with a premium that is $600/year. If this is the current premium payment that is to be paid, and the individual dies within that period, then the beneficiary will also receive $1 million and tax-free. There are various kinds of life insurance products for purposes today.

Why is Life Insurance a Necessity?

A fundamental question that is often asked is will someone is adversely effected by the untimely death of the insured.

Here is a question that most people ponder on. If they were to die the next day, who would then be responsible for paying her debt. If the deceased owns a home, business or personal liabilities, someone else will then be responsible for these. This is normally the next of kin. Therefore, the spouse, parents, and siblings of the deceased could end up paying the debts which makes it quite unfair for them.

Those who have children invest in life insurance because they do not want to put their family at risk. For business owners, they consider it very important to have a succession plan just in case something does happen to them. For business owners who do not have a succession plan, the financial advisor has to figure out who will be next in line to run the company.

Another concern of most people is how much insurance they should get. There is no specific answer because everyone requires different insurance. There are many variables that determine the kind of insurance that an individual invests in. It also depends on age, sex, and finances. The best factor is how much insurance a person can afford.

Now that everything is all figured out, the individual then searches where to buy life insurance. It is a compelling and competitive industry. There are some companies that are better selling certain insurance over others. Having a financial advisor can make the decision making easier for the person buying the insurance. It also depends on the person if he or she would resort to a captain agent. A captain agent is a person who works for a specific insurance company and only sells the insurance from that company. It is better to go around and consider all possible insurance.

Life insurance is never fun to talk about, but once individuals sit down and confide with experts who have their best interests in mind, then they may regard life insurance as something that they not only need but want as well - to protect their family, business, dependents, and legacy.

1. No one knows what tomorrow has in store.

Anyone can die suddenly, like an accident or an unexpected illness or natural causes. Any of these can happen at any moment. Life insurance also helps loved ones pay bills, mortgage, college costs even after this has long been gone. It also provides tax-free cash to pay death duties and estate. Nothing can replace the insured in their hearts but planning this with insurance can also make the grieving stage easier for those who are left behind.

2. Funerals can be very expensive.

Funerals can cost between $7,000 to as much as $10,000. This is just the average service and not the extravagant ones. The time is already emotional and difficult, and life insurance can cover these bills by not stressing those involved with financial hardship.

3. Protecting the loved ones of the insured individual.

Those who work wish to protect their loved ones - spouse, children, partner, family members. They make sure that these people are well taken care of. It is very important to consider financial support by providing the future for the dependents who survive.

4. Death should not equate to debt.

Life insurance assists the dependents in covering the financial responsibilities that the insured leave behind after her death. Debt can be quite a tremendous burden especially when this comes with the emotional toll that the death of the insured individual creates.

5. The unexpected can happen

If the individual develops a serious illness, he or she may not get life insurance. If the person has been diagnosed with a terminal illness, life insurance can provide financial support. Life insurance can also be the tool in case of emergencies, and this can be done by requesting loans or withdrawals.

6. Taking care of business

Life insurance is not just for individuals. It can also protect the business from any kind of liabilities, instability or financial loss just in case the insured individual does pass away. Whether the person provides the necessary short-term cash and keeping operations, then it goes until things settle down. Life insurance can also be invaluable when maintaining the business that the person has already worked so hard for.

7. Supplementing the retirement.

You can also use the life insurance to make sure the retirement savings that lasts as long as it is done. An annuity is like a pension plan that you can do for yourself. If the individual puts enough amount of money and turns this into a life insurance product, then in return this can guarantee a good enough stream of income each month.

8. It makes logical financial sense.

Life insurance is regarded as a financial asset that can also increase the credit and also help in loans and health insurance. There are policies that result in returning the cash value which occurs in case of bankruptcy and cannot be touched by any creditor.

9. Giving to charity

Life insurance also enables in leaving a lasting gift to the favorite cause and charity that is larger than is otherwise set aside for charity work and donation.

10. Peace of mind, plain and simple

There is no amount of money that can replace any individual. More than anything, life insurance helps in protecting any of life's uncertainties.

Life insurance is a very selfless gift that can be given to people left behind. It is not as complicated or even as expensive as many people think. Rather than viewing this as such, it must be considered as a necessity for the individual and loved ones. This can be a potentially happy ending that leads to a difficult situation.

The gist of it all is that life insurance is not really for the individual who gets it but for his or her loved ones. Whether it be short-term family needs such as rent, bills, and funeral costs, this is a way for the surviving dependents to get by financially especially when left with loans and credit card debt. Life insurance can also help in keeping family members from tackling financial issues when these are least expected.

Long-term family needs can also be covered especially when this results to an economic impact due to a loss. Family members make major changes, and these create additional expenses. Sometimes, it may not even be death but non-working spouses returning to the workforce and also needed to pay for daycare. Life insurance can cover life's new expenses. 

If children are in the picture, life insurance provides normalcy and stability. Life insurance should not be as expensive as deemed to be. This is dependent on variables such as age, sex, health, and kind of policy. It costs less than people think. As long as there are appropriate budgeting and spending, life insurance is affordable. When life insurance is purchased, individuals will then feel that when the time comes they need it the most, they are saving more than what they thought they would have to shell out because of these unexpected costs.