What protects your family against financial loss due to your death?

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Whether you're married with kids, or have a partner or other relatives who depend on you financially, having life insurance can be important. Life insurance provides money, or what's known as a death benefit, to your chosen beneficiary after you die. It can help give your loved ones access to money when they need it.

Understanding life insurance can help you plan for your family's long-term financial needs. Here are five reasons why life insurance is important.

Life insurance is meant to help protect your family's financial future. Even if you have savings, it's unlikely that it would be enough to cover your family's expenses for several years or even decades if something happens to you unexpectedly. Typically, there are three types of life insurance to consider: term life, whole life or universal life.

Term Life Insurance

This type of life insurance offers coverage for a set period of time — generally 10, 15, 20 or 30 years. Coverage expires at the end of the term. However, most term life insurance policies also offer optional riders that could allow you to renew or convert your policy.1

Whole Life Insurance

This type of life insurance doesn't expire as long as you continue to pay the premiums. It also offers a cash value component that has growth potential. You also can borrow from the cash value, but loans or withdrawals may generate an income tax liability, reduce the cash value and death benefit and cause the policy to lapse. Loans will also accrue interest. The policy may be issued as a Modified Endowment Contract (MEC) for tax purposes. Any withdrawals or surrenders could result in a taxable event.

Universal Life Insurance

This type of life insurance is similar to whole life because it also does not expire as long as you continue to pay the premium, and it also has a cash value component. With a universal life policy, you typically have the flexibility to adjust the premium and death benefit. However, there must be enough cash value in the policy to cover monthly charges if a lower premium is paid than the amount selected at issue or if a premium payment is skipped. Additional premium payments may need to be made to keep the policy in force. Increases in coverage are also subject to underwriting.

We have financial professionals ready to assist you on your life insurance journey.

Whether you have a 9-to-5, are self-employed, or own a small business, your income might cover a portion or even all of your family's daily needs.

Housing, food, utilities, clothing, car maintenance and health care premiums are likely all part of your monthly budget, and even without your income, your family will still need to cover these expenses. The death benefit from a life insurance policy can help provide the funds your family may need to help cover these expenses. When considering your options, you may want to think about using a life insurance calculator to help you determine how much life you insurance you may need.

Certain types of debt don't go away when you die, which means your loved ones may have to use money from your estate or sell off other assets to cover them. This could leave less money to pay for expenses.

Life insurance can help your loved ones pay for any debt you leave behind, including credit card debt, business debt, personal and/or educational loans and mortgage debt. At a time when your loved ones are already dealing with your loss, life insurance can help ease some of the financial burdens they may experience after your passing.

MORE How Life Insurance Helps Protect a Mortgage

Funerals can be expensive. Dealing with this financial stress can add to the emotional stress your family might experience. Your family could use some of the death benefit from your life insurance policy to help pay for these costs. To do this, the beneficiary of the policy could direct some of the death benefit to the funeral home, or they can pay out-of-pocket and use the death benefit as a reimbursement for these expenses.

MORE What Does the Average Funeral Cost?

If you have children, life insurance can help your family pay for future childcare and education expenses, especially for college. Even if you've already started contributing to a 529 college savings plan, the death benefit from a life insurance policy can provide additional money to help cover your children's education if you were to die.

Understanding life insurance and how much coverage you may need can help when making long-term financial plans. Making plans to help support your family's financial stability in the event that you pass could help to mitigate the stress and burden of an already difficult time. Depending on your financial goals and needs, life insurance could be an important part of this plan. For more information, consider speaking with a financial representative.

We have financial professionals ready to assist you on your life insurance journey.

Life insurance exists to help protect what matters most. According to 81 percent of Americans, their family is their most valuable asset,1 and most people say they want to care for their family the best they can. Life insurance is part of the foundation of a solid, long-term financial plan. Two-thirds of Americans recognize they need life insurance yet many do not have adequate coverage to protect their families.2

Life insurance is money intended for loved ones upon the death of the insured person. This money is typically used to help pay for funeral costs and outstanding debts left by the deceased. But life insurance can be so much more than that.

Life insurance isn’t a one-size-fits-all product. It can add additional financial security for loved ones by designating funds to help replace the income of a deceased breadwinner. It can be used to help family members offset the mortgage costs associated with your home, so loved ones can continue to enjoy the lifestyle you worked so hard to give them. You can provide funds that will be available when needed to help defray the costs of an education for your children. Or you can leave an inheritance to help a loved one achieve a goal important to them.

Beyond the lifeline your life insurance can provide for grieving loved ones, there’s another gift it can provide to the living — to YOU. Buying life insurance for your family may help enhance your sense of wellbeing, by giving you one less thing to worry about, knowing that you have done your best for those you love.

Some people find it difficult, or at least uncomfortable, to discuss mortality with their loved ones. Others may be overwhelmed at the variety of life insurance options available. There are also a lot of misconceptions about insurance — imagine that!

Let’s take a look at five of the most common misconceptions about life insurance.

This might make sense on the surface, but married or not, we all have loved ones who will have to take care of business when we’re no longer here. Are you one of the many people with student debt? Do you have a home mortgage? Car payment? What about credit card debt? Do you own a business? In addition to your final expenses, your loved ones may be left to deal with your finances.

People often think only the family breadwinner needs life insurance protection. However, if a full-time parent is no longer here, the family would have to make other arrangements for childcare, cooking, housecleaning, transportation to and from school and activities, and any other duties that parent had provided.

Remember that ‘dependents’ doesn’t necessarily mean children. If you are caring for elderly parents, or an adult with special needs, you would most likely want to make financial arrangements for their care.

The life insurance you may have through your employer is certainly a great place to start protecting your family. Is it enough? Ask your company’s benefits person for details about that policy, then use the acronym LIFE to help you gauge whether that amount is truly enough for your needs:

L = liabilities like your mortgage and loans

I = income needs to replace what your family would lose when you are not here

F = final expenses

E = education expenses for your children3

While it’s always a smart move to have money stashed away, an emergency fund is designed to provide for short-term emergencies like a medical bill or car repair. It is not designed to cover final expenses, debts, or the loss of future income that life insurance is designed to cover.3

And here it is — the #1 reason people cite for not buying life insurance:4

This misconception is perhaps the most unfortunate of all since life insurance costs far less than most people think. Forty-two percent of Americans estimate the cost to be three times the actual cost; 42 percent of Millennials estimate the cost at more than six times what it actually is!5 Since the cost of life insurance is determined primarily by your age and the state of your health, the longer you procrastinate, the higher your premiums will be.

Protecting your love ones financially when you aren’t there is totally doable. There’s no reason to put it off any longer. Contact a licensed insurance professional to help you choose the right type and amount of life insurance to suit your needs, your financial goals, and your budget.

1. 1. Life Happens, Protecting What Matters Most: Your Loved Ones (May 14, 2020)

2. 2. Life Happens, 2019 Insurance Barometer Study: Nearly Half of Americans More Likely to Buy Simplified Underwritten Life Insurance (May 14, 2020)

3. 3. Kiplinger, 5 Myths That Could Have You Walking a Financial Tightrope Without a Safety Net (May 15, 2020)

4. 4. Life Happens, 6 Reasons People Don’t Buy Life Insurance (and Why They’re Wrong) (June 17, 2020)

5. 5. Life Happens, Taking Americans’ Financial Pulse with the 2019 Insurance Barometer Study (May 15, 2020)

Categories: Insurance, Life Insurance

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