Insurance

5 Things You May Not Know About Life Insurance

Chances are good that the only time you hear about life insurance is when your employer discusses your benefits or perhaps late at night on one of those TV infomercials. Even then, you probably don’t really know what all the fuss is about and what your life insurance policy does or does not cover. While thinking about how to provide for your loved ones in the event of tragedy occur may be the furthest from your mind at this point in time, the earlier you can be prepared the better. Here are five important aspects to life insurance that you need to know.

Buying Life Insurance Is a Sound Financial Investment

Most of us know all about how important it is to save money for our retirement years, such as 401k or IRA accounts, even CDs and U.S. Gov’t Savings bonds, but did you know that buying life insurance also represents a sound financial investment. That financial relief there for your spouse and dependents to protect them in the event something happens to you.

Life Insurance Comes in Two Versions

There are two basic versions of life insurance for you to choose from. Term-life in which you pay a specified premium for a set number of years, 10, 20, 30, etc. With this type of insurance, you and your family are covered only for as long as the term is in effect. Once the term expires, so too does your coverage. Permanent life insurance remains in effect until you die or stop paying the premiums. Term is usually the least expensive of the two.

Life Insurance is More Affordable Than You Might Think

Most people are under the impression that life insurance premiums are quite expensive. Some types of insurance can be rather expensive and the more riders such as burial insurance you add, the more expensive your policy may get. The same applies if you suddenly start to experience major health issues or are a smoker. But providing you are in relatively good health and are not a smoker, you might be surprised at how affordable life insurance can be.

Life Insurance Can be Used as a Vehicle for Liquidity

As odd as it sounds, life insurance is not always a sunk cost… in the event it goes unused (hopefully). For a variety of reasons, those who take out insurance policies often feel the need to liquidate them. For example, those who are terminally ill can often rack up hefty medical bills while still alive. It is a morbid concept to consider, but there are people who end up sick that still outlive their savings, and the savings left for their family. Then, there are those who take out long-term policies while they still have a young family. Perhaps all of their kids are out of college, earning a living on their own, and the parents still have significant monthly insurance payments that aren’t the necessity they once were. A life settlement transaction, which is essentially selling your life insurance policy to a third-party for a lumpsum, is just another means of liquidity and obtaining a benefit from a policy that might otherwise go un-used. There are many services, and online calculators out there, that will give you an idea if your policy qualifies, and what the standing value of that policy may be. If immediate liquidity is important for you, it might be a good idea to at least consider the possibility of selling your policy.

Major Life Events Are a Good Time to Buy Life Insurance

Being an adult is full of major events, including getting married, buying a home, having children, getting a promotion or a new job. Times like these are often quoted as being the point at which many Americans start looking at the idea of purchasing life insurance as a way to protect their families in the event of an untimely death.