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My friend recently asked me about Life Insurance. She wanted to know which coverage she should get since she has 3 young kids and she is a stay at home mom. Her husband works full time and they have a mortgage. I think many people can relate to this family unit structure.
She was concerned that the Life Insurance her husband receives through his work would not be enough to cover their monthly expenses if anything were to happen to him.
I think most people’s life insurance policy they receive through work is not enough. So she was right to feel this way. I don’t know exactly what her husband’s life insurance policy provides, but I did recommend that she purchase additional life insurance.
What is Life Insurance?
Insurance is basically a ‘What If’ product that covers you and your family financially if an event were to happen. An event includes your death. You pay a monthly price (also known as a premium) every single month or a flat annual rate. If an event occurs, your insurance policy will become activated and the terms that were specified in your life insurance contract will be carried out.
For example, if you purchased Life Insurance with a policy that states your family is to receive $250K upon your death. When you die, your family will get paid the $250K from the insurance company. So even if you bought a life insurance policy yesterday, and then you die today, your family will receive $250K.
Here are the basic reasons why you need Life Insurance:
- Help provide for a family’s loss of income
- At least one person other than yourself relies on your income
- Cover short-term debts and needs
- Provide additional insurance protection during the child-raising years
- Provide longer-term protection to help your family pay off a mortgage or to help pay for a college education
There are different types of Life Insurance you can purchase and there are many different insurance companies you can purchase them from. You can choose from Term Life, Whole Life, Universal Life, Variable and Universal Life insurance policies.
I think the best type of insurance is Term Life insurance. Term life insurance is the most straightforward form of protection. You generally pay premiums on a monthly or annual basis and your family is protected for that “term”.
This was the life insurance product I recommended my friend to purchase. There are also many companies you can purchase this from. Some reputable insurance companies include Haven Life, MassMutual, State Farm, Geico, MetLife, Liberty Mutual, Progressive, Allstate, and Nationwide just to name a few.
You can also use a website like NerdWallet to compare Life Insurance quotes.
What is the Cost of Life Insurance?
When you purchase Life Insurance, you will receive a quote from the insurance company. Everyone’s quote is different. Many factors are considered for a quote such as age, health and the amount and duration of coverage you are purchasing. Basically, the younger and healthier you are, the cheaper your monthly premium will be. Your quote will generally be higher if you are older, a smoker and you are in poor health.
In most cases, you can lock in your quote for as long as you hold your insurance policy. So your monthly premium will never go up no matter how your health may change over the years. Please consult with your insurance agent about this as every company and policy is different. You will be assigned an agent as soon as you call to inquire about purchasing Life Insurance.
Having a Life Insurance policy in place is essential, especially when you have young kids. God forbid anything happens to the financial provider of a family. How will that family survive financially without life insurance?
It’s a major peace of mind knowing you have this taken care of. This is why I like Term Life Insurance. For a relatively low monthly premium, your family will be covered financially if something were to happen to you.
If your employer offers Life Insurance, see if the policy you have in place can cover all your monthly expenses in case you die. This includes your mortgage payments, rent, food, money for the kids, etc. If not, look into increasing your coverage which will, of course, increase your monthly premium.
You can also purchase a separate life insurance policy outside of your employer‘s plan if you wish. This is definitely a good idea if you can find a better insurance policy that your employer does not offer.
If you have people relying on your income, then it is a must that you get extra life insurance. I know most people do not like thinking about death, but it happens to the best and the rest of us. So people need to plan for the worst. The last thing you want to worry about when a death occurs is money. If you have proper life insurance, it will make things that much easier when the time comes for it to take effect.
Life Insurance is Not Enough
Having Life Insurance is not enough when preparing for the worst. I think couples need to share how bills are paid each month. Usually, only one person handles the finances within a household. I think this is a big mistake. If that person dies, then the other person will have no idea how to pay the bills to maintain their current lifestyle.
If only one person pays all the bills each month in your house, then have a discussion with them as soon as possible. Find out from them the details of how and when each bill needs to be paid. If that person dies, dealing with their death is enough to handle. You don’t want to have to worry about how to pay all of your bills on top of it.
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