One of the biggest disasters a family may face is the death of a breadwinner. Here’s a quick guide on how—and why—you may need life insurance.
Did you experience a storm recently? Once bad weather hits, your options may narrow quickly. Perhaps electricity goes out, so you can’t cook or watch TV. Or maybe roads close, keeping you from work or appointments.
The same is true with financial storms, and the hardest one to hit any family is a death of a breadwinner. Without a proper safety net, suddenly future options narrow: education plans may become derailed, or paying off a mortgage may suddenly be in jeopardy; perhaps even a new load of debt is added due to medical bills or final expenses.
That’s why life insurance is important. For your family, it creates an instant safety net, a shelter from a financial storm that upends dreams and futures.
Life insurance is a contract between you and your insurance company. In exchange for your premium payments, the insurance company will pay a cash benefit to your designated beneficiary(ies) upon your death.
For your loved ones, life insurance can be useful for many things. For example, it can:
Lately, life insurance has seen new uses. Single people may use it to protect parents if they are vital to the elder’s financial well-being. And it can help shore up a joint retirement fund for a surviving spouse.
There are two major types of life insurance; Whole life (or “whole of life”), is permanent insurance which may also be used for loans or investments. But the kind most financial advisors recommend is term life. It’s often called “pure insurance” because it simply provides coverage for a certain term of years.
Term insurance costs less, and—unless you have health issues—is typically easier to get. And while guaranteed issue plans may be available (where you are automatically approved for coverage), be aware that most meaningfully high cash benefit plans will require medical underwriting. It may also have age-at-issue limits.
A common rule of thumb is that you should have 10 to 12 times your annual salary in life insurance protection.
TIP: What if someone dies and you don’t know if they had life insurance? You can find lost life insurance policies. A clue may be bank statements that reveal premium payments. Another source is a search of participating carriers done by the National Association of Insurance Commissioners.
If anyone depends on your income, you need life insurance. Not having it is reckless and guarantees one thing—that your loved ones will not only face grief, but also a financial storm when you die.
The one thing you don’t want to do is wait. An old saying is, “Money pays, but health buys” life insurance. What that means is once you have a health condition (for example, high blood pressure, diabetes, or heart disease) it gets much harder to find coverage.
And once you are past a certain age (often age 60) you may not be able find high cash benefit plans at all.
The easiest way to get the coverage you need is with Indigo. In just a few minutes, Indigo will search its extensive database of nationwide carriers to find a policy that’s right for you.
TIP: Indigo is also a great tool to see if you are overpaying for any coverage you have now.