Recently published statistics on individuals with life insurance reveals a gloomy picture in which only 33% of USA citizens currently have life insurance. Life insurance is an insurance policy that acts as a cushion for dependents and other family members in case the breadwinner passes away. However, the importance of such a policy is often poorly understood, as evidenced by the statistics.
Importance of Life Insurance
Unfortunate events such as death or serious illness come without warning, and therefore it is of utmost importance that all your plans are already in place. Life insurance acts as a contingency plan allowing your family members to easily pay off your individual debt and funeral expenses. Lack of a suitable life insurance policy can result in increased burden upon family members that are already grieving over the demise of a loved one.
Certain events during life can compel individuals to opt for life insurance, such as being diagnosed with dementia or other chronic diseases. Life-threatening diseases means that the average life span is considerably reduced; life insurance can then act as a financial security measure for the dependent members of the family.
Reasons for Having Life Insurance
A basic life insurance policy can turn out to be highly beneficial for individuals that do not have sufficient liquid assets to pay off their final expenses. Furthermore, life insurance is also deemed to be necessary for individuals that have dependent household members who are unable to support themselves. A life insurance policy will ensure that these dependents are provided adequate financial support in time of need. Even if the spouse or children are independent, a life insurance policy will ensure that the grieving family members can take time to adjust to the changes without having to worry about going back to work immediately.
Furthermore, life insurance premiums can often be used for other purposes. A percentage of premiums can be borrowed tax-free and used during retirement or for college education purposes. This means that a life insurance policy does not merely act as an important financial security measure in times of unfortunate events, but can also be used as a means to save for future expenses.
Choosing a Suitable Life Insurance Policy
Ideally, a life insurance policy will allow your family members to meet their essential needs with relative ease; many experts suggest 4% interest income as a rule of thumb. This means that the life insurance policy must have sufficient funds so that a 4% interest income share is able to meet the family’s basic needs. To calculate the amount that will be required, include any mortgages, personals loans and debt and expenses that are likely to be incurred after death.
Life insurance policies ensure that you have the peace of mind you need from knowing that your family members will remain financially secure, even without you.