Life Insurance 101: Understanding the Basics and Why You Need It
“The best time to buy life insurance is when you can afford it. The second-best time is now.”
You must have heard people saying phrases like “life is unpredictable” or “the future is uncertain”. As much as I hate to say this, It is the truth and that is why most people opt for life insurance. It acts as a safety net kept ready to tackle this unpredictability of life in case some unfortunate event occurs.
It also provides peace of mind and makes people feel secure, knowing that their loved ones will have something as support if heavens forbid something happens to them. According to Limra: 2022 insurance barometer study, two-thirds (68%) of life insurance owners report feeling financially secure, compared with 47% of non-owners.
I know this entire concept can be alien to some people and that is why they do not show much interest in it or are against it. But just because you do not understand something, it doesn’t mean that it’s necessarily bad. On the contrary, there are a lot of positive things related to life insurance that you may not even be aware of.
If that is the case with you, then this article is for you. Here, I will discuss more about this useful tool, which is in fact significantly beneficial. So read till the end and discover more.
Let’s First Get To Know The Basics!
Before you learn all about the benefits of it, let’s first get familiar with the basics that are related to life insurance. So let’s go to the bottom of it. How does it work? Its main purpose is to pay your loved ones a certain amount of money (it can be in the form of a lump sum or smaller payments) after you pass away.
The amount of money they are going to receive depends on the coverage you opted for. You’re the one who gets to decide how it’s going to be paid out and if it’s going to cover certain payments, like rent and/or mortgage.
Speaking of this, there are two types of life insurance, term life insurance and universal life insurance. What is the difference between these two? If you want to receive detailed information when it comes to this, then go now to any website that thoroughly discusses this topic (it can normally be found on the official website of any insurance company) because today we’ll only briefly mention it. The main difference between them is the fact that with term life insurance you are “covered” for a specific period of time, while universal means that you are “covered” for life.
DO YOU KNOW? The whole life insurance market size has grown steadily in the past years and is continuing to do so. It is expected to grow from USD 180.58 billion in 2024 to USD 205.16 billion in 2028.Alt Text – Whole life insurance global market report.
The Living Expenses Of Your Dependents Will Be Covered
There’s a general rule of thumb as far as life insurance death benefit is concerned, that it’s supposed to be worth roughly ten times your salary. If you opt for a policy that provides this, then it means that your loved ones will have enough money to cover different life expenses after you’re gone, which in today’s economy is a huge deal for sure.
Additionally, they can employ the benefits to cover a variety of different costs they deal with on a regular basis, like utility bills, mortgage payments, groceries, and many other necessities. The amount of life insurance that you should pick should primarily depend on your financial goals.
If you aspire to cover some massive expenses, then you should opt for bigger coverage. For instance, people tend to select premium insurance policies when they want life insurance to pay for their kid’s college.
A Great Income Alternative
Life can oftentimes be very unpredictable, and very challenging for those who struggle financially. That’s particularly the case with people who are breadwinners. Just imagine what your family is going to do if, God forbid, one day you die and with you, the income you’ve been earning goes away too?
If you haven’t had life insurance, then your loved ones are going to be completely helpless. On the other hand, those who have bought life insurance on time are practically taking care of their family, meaning that their dependents will receive enough money that can be perceived as a perfect income alternative.
The Entire Process Is Very Straightforward
A lot of people think that the whole application process is very complex and time-consuming, but that’s actually far from the truth. In fact, it’s the total opposite, which should be another reason to consider it.
Everything (in most cases) can be executed online, and it really doesn’t take more than several minutes, depending on the life insurance company you choose.
INTERESTING TIDBIT The COVID-19 pandemic sparked a significant rise in life insurance interest. A 2021 survey showed that more people purchased life insurance after seeing the financial strain the pandemic put on families.
There Are Life Insurance Companies That Do Not Require Any Proof That You Have Any Health Problems
A vast majority of insurance companies provide people with Guaranteed Acceptance of Whole Life Insurance. So what does it mean? It means that you are not obligated to have any medical exam or answer any health-related question, and you will still receive the coverage you demand because of the health issues that you are suffering from.
There are a variety of different reasons why people decide to purchase life insurance. What you can do is go through this guide, get your facts straight, and then conclude whether it’s worth the money or not.
