Why You Need Life Insurance If You Have a Young Family
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Life insurance is often at the bottom of many people's to-do lists. The reluctance to confront the inevitability of death, coupled with the complexity of choosing the right policy, can make life insurance seem like a daunting task.
However, the essence of life insurance—securing the financial future of your loved ones — makes it a crucial decision for anyone looking to offer their family financial protection and peace of mind.
In this article
The primary reason to get life insurance
The primary purpose of life insurance is to provide your loved ones with financial security in the event of your untimely death. This safety net ensures that your dependents can maintain their standard of living, cover final expenses such as funeral costs, and meet ongoing financial obligations without undue hardship. For new parents, life insurance becomes an indispensable tool for safeguarding your child's future, offering a way to secure college savings and ensure that your child’s life insurance needs are met from an early age.
Up to $2 million in coverage
- Get covered in 5 minutes.
- 95% of customers approved.
- No Hassles. No Gimmicks. Easy Application.
- Non-Commissioned Agents.
- Ages 20+
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- Fast Coverage.
Why many forego life insurance
Only 59% of Americans have life insurance, and about half of those are underinsured, according to LIMRA, an association of life insurance companies.
More people may not buy policies because they don’t understand how life insurance works and think they can’t afford it. A 2016 study by LIMRA found that 83% of people would consider buying life insurance if it was easier to understand.
We’re here to help you figure some of that out.
Oh, and that group life insurance policy you have through work? Don’t expect that to be near enough to cover your family’s needs.
Employers sometimes offer free or low-cost life insurance to employees. Often, the policy is only valid for as long as you work there. The death benefits are usually low, creating average coverage gaps of $225,000, LIMRA estimates.
A policy at work may make you think you don’t need coverage on your own. If anything, group life insurance should complement a policy you already have.
Bridging the information gap
A pivotal step in closing the life insurance gap is education. Many avoid or delay purchasing life insurance due to a lack of understanding of its benefits and the peace of mind it can offer. Simplifying the process and educating potential policyholders on the value of life insurance can significantly impact decision-making.
Types of life insurance
Life insurance policies span a wide range, each tailored to different life stages, financial goals, and coverage needs. Two primary categories dominate the market: term life insurance and whole life insurance.
- Term life insurance: Known for its simplicity and affordability, term life insurance provides coverage for a specified period, typically ranging from 10 to 30 years. It's an ideal solution for individuals seeking a significant amount of coverage with lower premiums. Term life insurance is particularly relevant for those with time-bound financial obligations, such as a mortgage or college tuition.
- Whole life insurance: Offering a lifetime of coverage, whole life insurance combines a death benefit with a savings component. This cash value account grows tax-deferred at a guaranteed rate and can be borrowed against for future needs. While premiums are higher compared to term life, the policy's enduring nature and investment potential make it a valuable tool for long-term financial planning.
Up to $2 million in coverage
- Get covered in 5 minutes.
- 95% of customers approved.
- No Hassles. No Gimmicks. Easy Application.
- Non-Commissioned Agents.
- Ages 20+
- 100% Online Application.
- Fast Coverage.
The benefits of life insurance
Life insurance extends beyond mere financial protection in the event of death. It offers a safety net that can support your loved ones in multiple ways:
- Financial security for your dependents. Life insurance is an essential pillar of personal finance, offering a robust safety net for your dependents. By securing a policy, you ensure that they can afford to live comfortably, pay for educational needs, and meet day-to-day expenses. With the right life insurance coverage, you provide not just for their immediate needs but also support long-term financial goals, ensuring a stable and secure future. This is particularly critical for new parents, as a life insurance policy can also function as a cornerstone for a child’s financial future, safeguarding against the unforeseen and offering peace of mind that their needs will be met, no matter what.
- Financial planning. Beyond the immediate benefit of financial protection for your dependents, life insurance plays a strategic role in comprehensive financial planning. It can serve as a source of liquidity for estate taxes, a funding mechanism for business succession plans, or as a stable investment in a diversified portfolio. The cash value component of whole life insurance, in particular, offers a conservative investment option with tax advantages, suitable for those seeking a balance between insurance coverage and financial growth.
- Coverage for final expenses. One often overlooked aspect of life insurance is its role in covering final expenses and funeral costs. These costs can be significant, and without proper planning, can create an additional financial burden for families during a time of loss. Life insurance ensures that funds are available to cover these expenses, allowing loved ones to focus on grieving and healing rather than financial concerns.
- Investment in your child's future. New parenthood brings with it a profound sense of responsibility for your child's well-being and future. Life insurance becomes an essential consideration, not just for the immediate benefit of a death payout but as a foundation for your child’s financial security. Child life insurance, either as a standalone policy or a rider on a parent's policy, ensures that, no matter what the future holds, your child’s future insurability and financial needs can be met. Additionally, policies geared towards new parents can offer tailored benefits, including college savings plans and coverage for child-specific milestones.
- Peace of mind: Investing in life insurance brings an unparalleled sense of security, knowing your loved ones will be financially protected. This peace of mind allows you to enjoy life's moments more fully, with the confidence that you've taken steps to secure your family's future. It alleviates the worry of financial hardship in the event of an unexpected tragedy, ensuring that your family can focus on healing rather than financial stress.
Maximizing your coverage
Assess your financial needs
Begin with a thorough assessment of your financial obligations, goals, and the standard of living you wish to secure for your dependents. Start by cataloging your current financial responsibilities, including mortgages, loans, credit card debts, daily living expenses, and any other regular outgoings. Reflect on your long-term goals: education for your children, a spouse's retirement security, or leaving a legacy. Consider not just the immediate needs but also future aspirations, such as funding your child's college education or ensuring your partner can maintain their lifestyle in retirement.
Quantify your contributions to the household, factoring in not only your salary but also the value of services you provide that would require financial replacement if you were no longer there, such as childcare or home maintenance. This thorough evaluation should encompass both tangible and intangible contributions, painting a full picture of your role within the family's financial ecosystem.
Furthermore, assess the impact of inflation on future financial needs, recognizing that today's dollar will not stretch as far tomorrow. This foresight is crucial in ensuring that the life insurance coverage you select is robust enough to support your dependents' needs, even as the cost of living increases.
Your assessment should also consider any existing savings, investments, and existing life insurance coverage you may have, including policies through employment. These resources can provide a foundation upon which additional coverage can be built, ensuring a comprehensive safety net for your loved ones.
Calculate the required coverage
Determining the right amount of life insurance coverage is crucial. Consider not just your current financial obligations, but also future needs such as college tuition for children, ongoing living expenses for your partner, and potential increases in cost of living. An adequate coverage amount ensures that your family's future is protected, allowing them to maintain their lifestyle without financial strain. Online calculators and professional advice can aid in this assessment, providing a tailored coverage plan that meets your specific needs.
Compare policies
Comparing life insurance policies is akin to shopping for any major investment. Look beyond the premiums to the policy benefits, terms, and conditions. Consider the differences between term life insurance and whole life insurance policies, including the potential for cash value accumulation with whole life policies. By carefully comparing options, you can find a policy that offers the best balance of coverage, cost, and long-term financial strategy.
Consider future insurability
Life insurance is not just a static component of your financial plan; it should evolve with your life. Selecting a policy that allows for adjustments based on future insurability is vital. As your life changes—such as new children, a mortgage, or changes in health—your policy should adapt to ensure continuous and adequate coverage. This foresight can prevent gaps in coverage and ensure that your life insurance continues to meet your family's changing needs.
Navigate life insurance premiums
Understanding life insurance premiums is key to selecting the right policy. Premiums are influenced by a range of factors, including the policyholder's age, health, lifestyle, and the amount of coverage desired. Term life insurance typically offers lower premiums due to its finite coverage period, making it an attractive option for young families or individuals on a budget. Whole life insurance, with its added investment component and lifelong coverage, commands higher premiums but builds cash value that can serve as a financial resource later in life.
Review regularly
The importance of regularly reviewing your life insurance policy cannot be overstated. As personal and financial circumstances change, so too should your coverage. Regular reviews help identify any discrepancies between your current situation and your policy's provisions, ensuring that your coverage remains aligned with your needs. This proactive approach guarantees that your life insurance policy continues to provide the financial security and peace of mind you intended.
The rise of online life insurance platforms
The digital age has streamlined the process of obtaining life insurance. Online platforms offer the convenience of comparing policies, instant quotes, and simplified application processes without the need for traditional medical exams. This accessibility is a game-changer, demystifying life insurance and making it more approachable for everyone.
The online insurer Bestow sells insurance plans with $50,000 to $1 million in coverage for as little as $8 per month. Policy terms can be for 10 or 20 years.
Qualifying doesn’t require seeing a doctor for a checkup. Fill out Bestow’s online form in minutes to get a quote almost instantly. The only requirement is that applicants must be under age 54.
That’s much easier than a traditional insurance company will often require. A medical exam may be required to determine if any medical conditions could lower an applicant’s life expectancy. Denial of an application due to a health condition could affect future insurance applications.
Up to $2 million in coverage
- Get covered in 5 minutes.
- 95% of customers approved.
- No Hassles. No Gimmicks. Easy Application.
- Non-Commissioned Agents.
- Ages 20+
- 100% Online Application.
- Fast Coverage.
The bottom line
Life insurance is more than a policy—it's a comprehensive strategy for ensuring your loved ones' financial security and peace of mind. Whether you're a new parent looking to protect your child's future, an individual seeking to provide a safety net for your dependents, or someone interested in the investment potential of life insurance, the time to act is now. By embracing the importance of life insurance and making informed decisions about coverage, you can lay the foundation for a secure financial future for your family.
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