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How Life Insurance Can Help Protect Your Family by Brandon Kelly- ConsumersAdvocate.org

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How Life Insurance Can Help Protect Your Family

When you think about protecting your family, what’s the first thing that comes to mind? Perhaps a home security system or carbon monoxide monitor? Maybe safety features for your car or even childproofing for certain areas of your home? Financial protection might be the last thing that crosses your mind when thinking about your family’s future. It’s only when we’re faced with hard truths and difficult situations that we realize just how unpredictable life can be and how important it is to prepare — as best as possible — for unforeseen expenses.

According to the Insurance Information Institute and LIMRA’s Insurance Barometer Study, about 60% of people in the United States were covered by some form of life insurance that year, and 1 in 5 of those people felt their life insurance coverage was not enough. For many, the biggest factor for not purchasing life insurance has less to do with having to plan for the end of their lives and more with the costs associated with an insurance policy. However, the same statistics also reveal that people, especially younger generations, tend to overestimate the cost of life insurance.

Life Insurance is Less About Money Than It Is About Peace of Mind

Life insurance isn’t just about money, it’s also about caring for our loved ones even after we’re no longer there to provide for their needs. If you have dependents that will rely on you financially for years to come, especially if you are the primary caretaker of young children, elderly parents, or a disabled family member, life insurance could provide you a great deal of peace of mind. A death benefit can be used to cover funeral expenses, pay down debt, and supplement or altogether replace your income.

Life insurance options like whole life insurance also offer additional perks for a higher premium, including lifetime coverage and a tax-deferred cash value component that functions as a separate savings account. Policyholders able to afford a permanent life insurance option like whole life can use their accumulated cash value to take a loan, make withdrawals, pay for their life insurance premiums, and more.

Starting Early is the Best Way to Save

The best way to stop worrying about the future is to take action now, while you’re young and healthy. The earlier you purchase life insurance, the better your rate will be. Life insurance premiums are based on a number of factors, from your age, gender, and marital status to your health history and occupation.

To manage the cost of premiums, experts suggest it’s best to get life insurance when you’re least likely to need it, in your 20s or 30s. According to the online insurance marketplace Policygenius, the average monthly rate for someone between the ages of 35 and 39 is $26.20 for a life insurance policy with a death benefit of $500,000. Keep in mind the exact premium amount will depend on your personal details and health history.

If you’re a smoker, an older adult or simply not in good health, there are still options out there. However, the older you get, the more expensive your premiums will become, often twice what you would pay being young and healthy. A policy for a smoker or someone in the same risk group, meaning those more likely to file a claim early, is generally considered “substandard.” Not only are substandard policies more expensive, but they also tend to be more restrictive in terms of coverage provisions.

Consider Your Family’s Needs

If you’re already considering life insurance and don’t know where to start, a good strategy is to first assess your family’s needs thinking far into the future. How much of your children’s expenses do you cover right now? Are those expenses likely to increase or decrease with time? How much time would your spouse or dependents need to get back on their feet financially after taking care of your funeral expenses or hospital bills?

Insurance expert Chris Huntley from Insurance Blog by Chris suggests that you consider the following when calculating a death benefit for your loved ones:

1.The number of years until your retirement

2.Your spouse’s income potential

3.Any debt you may have

4.Any savings and investments

5.Inflation and interest

Also think about the type of life insurance that would best meet your family’s future needs. Term life insurance is cheaper but expires once you reach a certain age. Permanent life insurance, on the other hand, never expires and offers a cash value component you can make use of, but it tends to be much more expensive than term life policies.

Talk to your family and assess their needs, taking into account your debt, savings, and the reality of inflation. Before making a decision, do your homework and read about the benefits of life insurance as well as the pros and cons of working with different insurance companies. The best option for you might be very different than the best option for your friends or the best one for your neighbors.


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