Why do we need life insurance
Base on the definition of Insurance, it is a contract binding a party to indemnify another against specified loss in return for premiums paid.
Using layman’s word, life insurance means a company ensures that in case of death by the insured, they will pay a certain amount to his family in exchange for continues payment of premiums. Let us just hope that the coverage is enough to cover for the loss of income due to the death of the breadwinner.
You may need to understand life insurance better in order for you to be able to take out enough insurance coverage for your life so that your family will not suffer financial losses. They may be able to live with the emotional loss because of your demise, but suffering from financial loss may be too much.
People who need life insurance and why
Another easy way to explain life insurance is the term income protection. It protects the income to bring home should you prematurely demise.
Thus, life insurance is necessary for husbands who support a family especially if the wife is not working. This is because should the husband die, the family will suffer financial problems. Life insurance will take care of that financial problem.
If the husband and the wife work, their need for life insurance is unclear. However, if the lifestyle of their family needs both incomes, it is a recommendation that both husband and wife acquire separate insurance plans. That is the only way to ensure that the family will be able to live in the same manner even after the death of one of the spouses.
Families with existing mortgage or currently spending for children’s education may need to acquire life insurance for both the husband and the wife. Although, it may depend on the amount of their obligation, the choice of getting only one policy or two policies may be of huge consideration. This is because the family needs to ensure that should one of the spouse demise, there is enough fund to pay off the existing obligation.
If you are not one of the people mentioned above, you may still need to get a life insurance, although you need to remember that insurance is not an investment. An insurance plan is merely an income protection. Additionally, if you are independently wealthy, life insurance may not be necessary for you.
Why do other people consider life insurance as waste of money?
Wasting money in a insurance plan is a possibility. This is because if you avail of term life insurance, say for five years you take out an insurance plan, and you did not die during the effectivity of your policy. Upon the expiration of your policy, you are lucky that you are still standing but you have already lost all the premiums you have paid.
Although, I believe that the term wasting money is not accurate. It is because you surely get the insurance for a specific purpose, which is to protect your family’s income in any eventuality. Additionally, term life insurance pays cheap premiums because it is dependent on the possibility of dying within the period of effectivity of your insurance plan.
It is still advisable to get term life insurance because of the peace of mind it offers. You will be able to sleep well at night knowing that should you fail to see the light of day, you are sure that family will not suffer financial losses.
Moreover, if you get a term life insurance, you may try to find an insurance company that offers the possibility of converting the term insurance to permanent life insurance after the expiration of its coverage. This may be good because you may get cheaper premiums on your term insurance and when you finally convert into the permanent insurance plan, you may not need to proof insurability.
However, if you can afford to pay higher premium for permanent life insurance as early as now, it may be more reasonable to get permanent plan outright because you accumulate cash value earlier. You may still enjoy the cash value should you need to during your lifetime.
Before you decide to acquire a life insurance, especially permanent life insurance, research to find the most stable insurance company that may possibly give more cash value. Talk to a few insurance agents before finally signing on a policy.
This move will ensure your family will be able to live the life you want them to, even if you pass on earlier.
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