With all of the significant financial pressures that Americans face today, some are quick to discard life insurance as a viable and necessary financial tool. Because they have notions that the policies are intimidating or unaffordable, many often divert their resources elsewhere. However, as any financial advisor will attest, life insurance is a vital part of the long term welfare of the purchaser’s family. Having life insurance allows someone to know that their family will be taken care of after they die. Also, life insurance doesn’t have to be difficult to understand or pay for. There are simple options that can provide peace of mind and financial security.
The most obvious benefits of term life are that it comes with a lower cost to those who purchase a policy, and the specifications are quite straightforward. Those who buy term life insurance pay low, fixed monthly premiums based on the amount of coverage needed and the policy’s term duration, usually 10, 20, or 30 years. The amount of coverage can vary greatly depending on the needs of the purchaser, from $100,000 to several million dollars. One rule of thumb for the primary breadwinner of a family is to purchase 10 times the person’s average annual salary. Some choose less coverage, and many choose more coverage for more peace of mind.
Whole life insurance is purchased to ensure a lifelong, or permanent, protection policy that also has a tax-sheltered cash savings account component that can be used to supplement retirement planning. Although the premium payments are higher than those for term life insurance, the cash value that is built up can be borrowed against to pay for a home purchase, educational expenses, or any other expenses associated with a life event such as a wedding. This highlights one of the main benefits that whole life carries over term life. Once the term has ended for the premium payments of term life insurance, the policy holder gets nothing back, whereas on a whole life policy, the cash value will remain intact. Whole life is an effective tool to protect lifelong coverage and estate concerns which can include burial expenses and estate taxes.
Many large employers offer group life insurance as a part of their employee benefits. Small business can provide their loyal employees with this peace of mind as well. Whether the business has a handful of people or a large employee base, group plans are utilized as a strong incentive for new hires. Many providers develop these group plans to make them affordable to small business owners. It is definitely something to consider for owners of small and large businesses alike.
Life insurance is an effective and affordable way for people to protect themselves, their loved ones, and their businesses. Whether a purchaser decides upon term or whole life insurance, the importance of having a policy cannot be overstated. In most cases, it is an option they can’t afford not to have.