Life Insurance: When to Buy a Policy and How Much You Need
Everyone knows life insurance is important, but let's answer some common questions about when to buy life insurance, the basic types of coverage, and more.
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September is Life Insurance Awareness Month, so I want to share an important story about a friend. Her husband died in a car accident many years ago when her three children were still in elementary school. He was the sole breadwinner, working as a high school principal, while she stayed home to care for their young family.
Although she had an MBA and prior work experience to fall back on, I can’t imagine getting forced back into the workplace at that difficult time in her life. Fortunately, she didn’t have to leave her children at daycare or with a nanny to earn a living because her husband was covered by life insurance.
She was able to continue raising her brood knowing there was plenty of money in the bank, instead of dealing with her grief while also going on job interviews and feeling even more anxious and worried about their future.
My friend and her children were able to better cope with the tragedy because they had the financial ability to maintain their standard of living and lifestyle. She could easily pay funeral costs, ongoing bills, future education expenses, and protect her retirement plans.
That would never have been possible if she wasn’t a life insurance beneficiary.
What Is Life Insurance?
You probably know someone who's had a similar loss. It's exactly why life insurance was created. It gives you and your loved ones incredible peace of mind that your financial life will be okay even after an unexpected, deadly tragedy.
Life insurance is a contract with an insurance company that gives a beneficiary a lump-sum payment, known as a death benefit, when an insured person dies. There are different types, such as term life and permanent life.
Term life insurance gives you protection over a set period of time, such as 10 or 20 years, and permanent life provides lifetime coverage that may also grow a cash value.
If you want to make sure you get money back if you’re still alive when a policy expires, check out Return of Premium life policies. You can use the money to boost your retirement savings, pay off debt, or for anything you like.
Which type you should have depends on your financial goals and the needs of your loved ones.