“I’m not afraid of dying. I’m afraid of not trying”
For the vast majority of us, death is generally a concept we are more than happy to avoid confronting. But when it comes to our long-term financial goals and vision, we ultimately cannot afford to ignore the effects that lack of preparation has on our loved ones. As a community, we are far too often forced to live out the damaging circumstances that come with a lack of insurance planning including unpaid funeral bills, outstanding debts, and unanticipated tax bills. Even in the entertainment field, we’ve seen how the untimely death of legendary icons Prince, Michael Jackson, and Aretha Franklin created major financial conflicts due to the lack of a will or poor planning. With this in mind, there are several key reasons we should all have life insurance included in our overall plans.
Insurance Has More Than One Single Purpose
While it may seem self-explanatory, the primary purpose of having life insurance is to provide financial relief in the event of death. However, there are numerous other benefits that often go unnoticed or unrecognized. What many do not realize is that the IRS generally considers life insurance non-taxable, which means that in most cases the beneficiary does not end up with a tax bill for the proceeds they receive. This small yet critical detail is why life insurance really becomes pivotal. Not only does it allow tax-free income but also the opportunity to pass on significant generational wealth in the process. This makes it a must-have for anyone wishing to create a financial legacy while solidifying their estate plans.
The Amount You Need Will Vary Throughout Life
There are many contributing factors that determine how much life insurance is needed but among them, age is usually the key driver. Generally, the younger we are in age the more likely we are to experience good health, and so insurance may not appear like much of a need. However, the tradeoff is that purchasing an insurance policy almost always costs more money the older that we get. So, by forgoing the opportunity to purchase life insurance at a younger age you actually miss out on significant cost savings along with the safety and security of having coverage on your life. As we experience significant life events such as marriage, increased family size, and home ownership the need for life insurance becomes even more critical. Therefore, it’s imperative that you get started on life insurance while time is actually on your side. You can always re-evaluate the amount of coverage needed with time, but sooner is always better than later when it comes to insuring your life.
Every Insurance Type Does Not Make Sense For You
It’s important to note that life insurance generally falls under one of two categories: term life insurance and permanent life insurance. Term insurance provides coverage for a specified period of time such as 10 years, 20 years, or 30 years. If loss of life occurs during this time the beneficiary receives the policy amount; but conversely nothing is received if the insured outlives this period. The advantage of term is that it tends to be very inexpensive and your monthly premium remains fixed. Permanent insurance on the other hand remains effective for the entirety of your life and typically includes some form of cash value. There are multiple variations of permanent insurance including: whole life, variable life, and universal variable life. Therefore, it’s important to consult with a reputable professional in order to avoid purchasing something that doesn’t make good sense for you individually
There are very some simple ways to go about getting adequate life insurance including group plans through an employer or alumni association. However, if you decide to work with a broker or life insurance company directly be sure to check out independent rating services such Moody’s and Standard and Poor’s. This will help you determine the financial strength of the insurance company as well as their overall reputation. Remember: life insurance is not just about what you need at the moment, but the financial legacy you want to create for those you may end leaving behind.