Be Prepared for the Unexpected
One of the first things I advise my clients to do after setting up their budgets is to make sure they have an Emergency Fund. This is to make sure they are prepared for the unexpected such as car break downs, medical bills, appliance mishaps, etc. We can expect these things to happen whether we are single, married, separated, widowed, or divorced. Sometimes these unexpected events can be magnified, especially if we have children. That means the chances of something happening increases, along with the cost or expense. There is another event that we must talk about that is very important to the well being of your family. It is very much expected but the timing can be unexpected. I do not have any words to express how difficult death can be to deal with, even if it is expected. However, it can be extremely devastating when it is premature. That’s why it is especially important to make sure you have life insurance. Unfortunately, over 90 million Americans do not have life insurance. That means that there is the possibility of millions of people dying unprotected. Why would people die without life insurance? Some people do not understand life insurance, some do not know the importance of life insurance, and some believe they cannot afford it, while others have enough money to replace income and to cover expenses so they are self insured. Let’s talk about the first three reasons.
There are two main types of life insurance, Term and Permanent, also known as Cash Value. Term life insurance, also known as pure insurance, is coverage you pay for with specific terms and amounts of coverage. The cost of the coverage is based on your age, height, weight, medical condition, and the amount of the coverage. The terms are usually 10, 15, 20, 25, 30, or 35 years. Permanent life insurance, also known as cash value, has products called whole life, universal life, variable life, as well as others. The cost of the coverage is based on your age, height, weight, medical condition, and the amount of coverage. However, there are times when height, weight, and medical condition are not considered. In these cases the amount of coverage is usually limited to less than $100,000. There is a savings component built into permanent life insurance and the insurance company agrees to pay a guaranteed amount of interest. These policies build cash value and allow the policyholders to borrow against the cash value. The main reason for life insurance is the death benefit. The death benefit is the amount of coverage the insurance company agrees to pay the policyholders’ beneficiary or beneficiaries if they die during the term of the policy. (Example: John purchases a $500,000 policy with a 30 year term and a monthly premium of $60 per month. If John continues to make the monthly payments and happens to die during the term of the policy, the insurance company will pay John’s beneficiary $500,000).
If someone with a family passes away without life insurance and do not have enough money to cover the costs of their funeral and their outstanding bills, they can put their family in a huge financial bind. Unfortunately, this happens more times than I would like to admit. I am sure you often see requests on social media to assist families with burial expenses for a loved one who passed away unexpectedly and/or did not have life insurance. To add insult to injury, after the funeral is paid for there are still bills that need to be paid, including rent or mortgage, car, utilities, and education. These expenses may have been manageable with the extra income of the family member who has passed away, but they can be almost impossible to pay with that loss of income. Sometimes that means that the family will have to move to a less expensive house or apartment. The children may even have to change schools. That can be even more devastating to a family on top of the fact that they are already grieving the loss of their loved one. Life insurance can help to cover those expenses and cause the family to worry less about finances and to maintain their standard of living. Imagine how helpful this can be during such a difficult time. Life insurance can be a life saver in a manner of speaking.
How much life insurance should you purchase? The rule of thumb is to purchase 7 – 10 times your annual income. Therefore, if your annual salary is $50,000, then you should purchase $350,000 – $500,000 of coverage. However, everybody’s insurance needs are different based on their individual goals. Some of the factors include whether or not you are married, have children, own a home, want your children to attend college, have outstanding debt that needs to be repaid, if you have existing life insurance, if you want to leave a legacy, etc. Finally, the cost of life insurance depends on the type of insurance you purchase, the term, and the amount. The cost for coverage can be less than you think. Click here for more information about life insurance. If you do not have life insurance, I urge you to research and ask questions, sit down and talk to someone about coverage, and make a decision about coverage today. You owe it to yourself and your loved ones. All the best.
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