Month: September 2021
Why Do You Need Life Insurance?
A lot of us in Oswego, Montgomery and Morris (IL) may like to envision a scenario in which we live as long as possible and achieve many of our life plans. Unfortunately, no matter how well we write and follow our life narrative, life itself tends to go off-script.
Life insurance is our safeguard against the unpredictable. In the event of our death, the death benefit built into a life insurance policy can ensure that our survivors continue receiving income we otherwise might have provided. It becomes our backup plan for our family and loved ones.
At the same time, depending on our circumstances, outlook and age, some of us may still ask ourselves why we need life insurance. We might avoid or postpone it because:
we think it’s too expensive. Acquiring life insurance typically comes down to money. However, depending on certain factors, a policy can cost less in a year than we might spend on dining and entertainment in one month.
it seems complicated or confusing. Understanding the right policy for you and your life circumstances can be simple and easy, especially if you are working with your Hometowne Insurance agent. That agent has already done the work for you and can save you effort and time.
we think we don’t need it. In truth, if we have people who depend on us, or we think we will in the future, we do need it, especially if we want a good way to ensure they will have financial security in the event of our passing.
we can take care of it later. This thought can be challenging because we do not get healthier as we get older. Life insurance rates are based on your health and age, so the best, most affordable time to acquire life insurance is now.
Let’s discuss more about what life insurance is and how it can be one of the best financial choices you make for yourself and your loved ones in Oswego, Montgomery or Morris.
Why Do You Need Life Insurance? The Basics
Life insurance is insurance that pays out a sum of money either on the death of the insured person or after a set period. A policy typically includes an owner or policyholder, a person whose life is insured (often but not always the policyholder) and any number of beneficiaries who will receive the death benefit.
Life insurance has two main types: term life and permanent life.
With term life, you keep the coverage in effect for a specified term, usually between one year and 30 years. The death benefit is paid out only if death occurs during the covered period. If you outlive the term, your beneficiaries will not receive a payout from the policy. Term life is typically the less expensive of the two coverage types.
With permanent insurance, you will be covered for your entire life: The policy remains in effect until you die, even if you live to 100. The premiums will be higher than for term life insurance, but you can still establish consistent premium amounts even though the risk of death goes up as you age.
The advantage of a permanent life policy is that in addition to paying for coverage, the premium payments develop a tax-deferred cash portion along the way. This makes permanent life a type of savings account. The cash value earns interest, and you can draw from the amount if needed. The cash portion can serve different functions as well. For example, you can use it for premium payments or as a source of additional income when you are older.
Permanent life insurance is typically categorized as three main types: whole life, universal life and variable life. The primary difference among them is how they manage the policy’s cash portion. With whole life and universal life, the cash portion is invested in the insurance company’s portfolio. Variable life insurance will invest the cash portion in the stock market.
Why Do You Need Life Insurance? Reasons
We’ve discussed how coverage provides a safety net for your survivors in the event of your passing. This is the most common purpose for carrying life insurance. Over time, you might have several other good reasons for having life insurance as well, such as:
you have remaining debt. After your passing, any debt that was held solely in your name will usually need to be paid off by your estate. If you co-signed a loan with anyone, responsibility for that debt will transfer to that person. Life insurance can satisfy both your debt and assist with the co-signer’s.
you own a business. If you have a business, life insurance can provide the business heirs with capital to either maintain or sell it after your passing. If you co-own the business with someone, each person may need coverage that will let them buy out the other’s ownership upon the other’s passing.
you want to satisfy funeral expenses. A funeral today can cost many thousands of dollars. If you have life insurance, you can ensure your survivors can pay for a burial or other memorial service.
Yet another advantage of having life insurance is the ability to pay any estate or inheritance taxes after death. You may also wish to leave a donation to a certain charity.
Life insurance can be a part of a sound retirement strategy as well. This is another area in which an independent agent can be a valuable consultant for your financial goals.
Why Do You Need Life Insurance? Timing
As we’ve mentioned, the younger you are when you start life insurance, the better. This is because younger people typically qualify for lower premiums, which will help make the policy less costly as they get older. Premiums will be higher later in life because our risk of dying increases. In some cases, an advanced age combined with a health condition can even disqualify a person from getting life insurance.
If you are still young, you might be dealing with debt such as a mortgage or rent payment, a car payment, student loans and credit card debt. This can understandably discourage you from purchasing a life insurance policy. However, if you want to be astute in seeing your bigger financial picture, acquiring life insurance now can pay big dividends later.
As an example, if you purchase $250,000 of life insurance at age 40, the premium can be more than double what you would have paid at age 30. The 10-year delay can result in several thousand dollars more to carry the same amount of protection.
Find the Right Cost and Coverage for You
As an independent agent serving Oswego, Montgomery and Morris, Hometowne Insurance can help you identify the right type and amount of life insurance for your specific circumstances. If you have further questions about why you need life insurance, we can answer them in helping you protect the people who are important to you. We welcome you to contact us today.
Oswego/Montgomery: (630) 554-4040
Morris: (815) 942-1312
We also help people understand why they need life insurance in nearby communities such as Plano, Yorkville, Batavia, Plainfield, Naperville and Aurora.