Is Life Insurance Necessary?
Life insurance is very different from other kinds of insurance. The differences are important to consider as you think over your insurance needs.
The major difference between life insurance and car insurance, for example, is that you may never get in a car accident and never have the need for the coverage. You may never have the need for homeowner’s insurance if nothing ever happens to your home or property. Only life insurance covers losses against an event that is guaranteed to occur at some point in time – the policyholder's death.
The truth is that unless someone discovers the key to eternal life, 10 out of 10 people will eventually die.
“This distinction is important to understand,” notes Vice President of Insurance Services for David Lerner Associates, Dan Gardella. “When viewed through this lens, life insurance isn’t an expense — it’s an asset that will eventually provide a return on your investment. As long as you pay the premiums and maintain the policy, your beneficiaries will eventually receive the death benefit.”
Life insurance is something that should be strongly considered, especially when there are other people in your life who depend on you financially. If you were to pass away, those people could be left in a delicate situation of having to cover expenses that were previously handled by you. Not to mention funeral costs, left-behind debt etc.
Life insurance helps ensure that your loved ones are protected if the unexpected occurs. You pay a monthly premium to keep your policy in good standing, and the insurance company pays a guaranteed amount of money (a death benefit) to your beneficiaries as a financial cushion at the time your family would need it most. Life insurance is not a luxury, it’s a necessity.
This payout could be used toward covering funeral expenses, mortgage, putting the kids through college, or even invested to potentially accrue added value over time.
There are two main types of life insurance: term and permanent. “With term insurance (10 or 20 years are the most popular) the payment of the death benefit is guaranteed by the insurance company as long as the policy remains in force,” Gardella explains.
A permanent insurance policy, also sometimes referred to as whole life insurance policy, is designed to build internal cash value that can be accessed before the insured dies via policy loan.
“Policyholders can tap into the cash value that builds up inside a permanent insurance policy to meet a wide range of financial needs, including providing income for retirement or paying for children’s college educations,” says Gardella.
Every individual’s and family’s insurance situation is unique, so you should consult with an insurance professional for guidance on the best type of life insurance for you and your family.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC