Yes, you need life insurance. But, now, the question is, “Why do you need life insurance?” Becoming a life insurance policyholder can be an integral part of your financial strategy. Having coverage can ensure your loved ones can acquire financial benefits after you pass away. If you’re on the fence about getting a life insurance plan, here are five reasons to help you decide:
1. Death Benefit
Many policyholders acquire life insurance plans because of the death benefit. It’s the face value or the amount of money the insurance firm guarantees to the beneficiaries or dependents registered in the policy.
After the insured dies, the insurance company gives the money indicated in the policy to the beneficiaries. These people might be your children, cousins, nephews, or spouse.
Bear in mind that the contract may indicate an insurable interest in which a person or entity may present damages or losses that can cause financial losses or hardships. The insurance company might mitigate these risks if something affected the asset.
Thus, ensure that you read every word before signing the document. Failure to read (and re-read) the policy may result in complications during future transactions.
2. Peace Of Mind
To possess a life insurance plan means to acquire peace of mind. Attain peace, knowing that your loved ones can still be financially capable even after you die.
Be mindful of the fact that even the best life can come with some woes, especially if you have children and/or a partner. Possessing a life insurance policy can help you obtain tremendous tranquility, knowing your beneficiaries can use the financial aid for several reasons.
If you plan on getting a life insurance plan, you need to comply with the requirements to pass the application. Ensure that you’re in peak health to increase the chances of insurance firms accepting your request.
Have a physical exam at the ready when asked about your current health. You may still obtain life insurance without a medical exam, but you might encounter several limitations and restrictions in the policy.
Moreover, young folks have an advantage over older people in applying for life insurance coverage. For instance, a 20-year-old person with a healthy lifestyle can enjoy lower premiums than a 45-year-old individual with addictive behaviors.
3. Accrue Cash Value
Life insurance plans, specifically permanent or whole life policies, can gain cash value over time. The cash value is like a savings plan, wherein the policy earns a relatively modest rate of interest from the accumulated earnings.
As the cash value in the plan increases, the insurer’s risk decreases since the accumulated monetary value offsets parts of the liability. But, some policies tend to have restrictions upon the cash value withdrawals.
For example, the policyholder wants to take a portion of the cash value to pay for premiums or buy additional coverage. The insurer may allow the policyholder to receive the cash value, but the policy’s death benefit may decrease.
For instance, you’re a proud owner of a policy with a $50,000 death benefit. The plan has no outstanding loans or cash withdrawals before this initial claim. Your plan now has an accumulated cash value of $10,000, and you withdraw that amount.
If you die while the plan is still in effect, the insurer pays the full death benefit to your beneficiaries. But, since you still have a balance of $10,000, the insurance company has the right to subtract the withdrawn cash value to the death benefit. Thus, the total amount of cash your beneficiaries will receive from the insurance plan is $40,000.
Nonetheless, think of the cash value as your secondary savings account. Increasing this financial benefit means paying your premiums on time and/or increasing the payments voluntarily.
4. Additional Coverage
Life insurance companies may offer additional features or riders to your plan. Although you may need to pay extra costs for these riders to remain in effect, the additional coverage can help you enjoy other benefits.
Two riders you should consider are:
- Accelerated Death Benefit: Unlike the conventional death benefit, the accelerated death benefit rider can help pay debts to fees for care of a terminally ill patient or an individual with a diagnosed chronic disorder.
- Disability Waiver Of Premium: This rider entitles you to stop paying for premiums for a period while maintaining coverage.
Making an investment in the right riders can help increase the comfort and peace of mind felt by policyholders and their beneficiaries. But, do take note that not all riders can benefit you significantly.
For example, the accidental death benefit (ADB) rider might not be a significant need for an individual who lives a sedentary lifestyle. You might be working at home, and you rarely go out. Consider not adding this particular rider to the policy as it’ll increase your premiums.
Talk with your insurer to help you decide which rider suits your specific needs. Proper communication with your insurance agent is vital to making the most out of the plan.
5. Makes You Want To Live
When the topic of life insurance comes to view, it’s almost impossible not to think about death. Owning a life insurance plan makes you think about the essential aspects of life: your loved ones. As a policyholder, thoughts about living can enter your mind.
The more you live throughout your years, the more cash value your plan accrues. Once you pass away, the insurance plan should gain additional cash value that may increase the death benefit.
In turn, your loved ones can use the extra cash to:
- Buy groceries
- Pay for a college education.
- Reduce mortgage costs
- Pay off credit card debts.
Understand the importance and beauty of life by being a proud life insurance policyholder.
Once again, if you’re asking yourself if you need life insurance, the answer should always be “yes.” Become a life insurance policyholder today, and you and your loved ones can reap benefits, like a peace of mind and financial security. Talk to your insurer for options, and make sure to read every part of the plan (including the fine print) to avoid potential complications.