Life insurance isn’t one of those topics people like to talk about. However, this doesn’t make it any less valuable. As much as the process of purchasing one may not be fun, it is one of the smartest financial planning decisions depending on your circumstances.
So, what is life insurance?
This is an insurance product that seeks to substitute for your income as the insured in case you die. If you have a family or dependents, this cover could be extremely important, especially when you are no longer there to provide for them. Moreover, most people need a life insurance policy.
Nevertheless, the majority of people wait until later in life. This is in spite of knowing that they need one.
What are the most popular types of life insurance covers?
Whole life insurance
This is whereby the policy covers you for the entirety of your life. Whole life insurance guarantees your dependants a guaranteed payout when you pass away. However, whole life insurance bears some benefits that you can use while you are still alive. This includes building cash value that grows with a tax deferral.
Term Life Insurance
Term life insurance covers you for a predetermined period of time, which may range from 10 to 30 years. Upon its expiry, as the policyholder, you can choose to renew the police, terminate it or change it to permanent coverage.
Endowment life policy
This is a life insurance policy that besides covering you, allows you to save money over a certain period of time. Upon maturity, you are able to get a lump sum amount on the policy. This will, of course, happen if you survive the term policy. You can use the money for retirement or pay for your children’s college. In the event that you die before it matures, your dependents are paid the assured amount of money.
Who doesn’t need life insurance?
In case you have saved enough money to cater for your funeral cost as well as take care of your family after you pass away, then you wouldn’t need one. You should also be debt free so that what you owe isn’t passed to your spouse or family members.
When should you purchase life insurance?
As long as you are an adult with an income, you can start paying for a life insurance policy. The advantage of starting out early is that the premiums are not as high as those of an old person.
Benefits of a life insurance
Life insurance comes with a host of benefits. This includes catering for your funeral costs. You also get to enjoy favorable tax conditions unlike what you would get with any other financial product. The ultimate benefit, however, is that your beneficiaries are financially taken care of when you pass away. Moreover, the sum paid to your beneficiaries is absolutely income-tax free.
Disadvantages of life insurance
As the policyholder, you have to sacrifice and forego your current expenditure to pay the required premiums. Apart from that, life insurance is commonly purchased for the benefit of others. Note that if you opt for the cash surrender value, you tend to get less than the premiums you paid for.
Life insurance purchasing process may be tedious given that you have to carry out your due diligence to get a trustworthy agent. Furthermore, you have to ensure that you get the right life insurance policy.
A life insurance policy is ideal for people from all walks of life. It doesn’t matter whether you hold a white-collar job or you are in business. If you have been working online for some time, and you are considering working from home on a full-time basis, there is no reason why you shouldn’t purchase a life insurance policy.