COVID-19 swiftly changed the lives of people all over the world. Suddenly, we have a global pandemic that is continuing to claim lives every day. These lost lives are not only leaving sad loved ones but also a huge financial burden to go along with it. No one wants to consider that that or someone they are close to will pass unexpectedly, but it a reality that we all must be prepared for. With that being the case, it is important to consider life insurance for yourself and those you love.
What is Life Insurance?
Life insurance leaves a non-taxable amount of money to predesignated individuals at the time of death. These funds are used to cover any financial responsibilities left behind including mortgage and personal loans. Life insurance can also cover funeral expenses and even replace the income of the deceased. Loved ones may share financial responsibilities such as credit cards, a lease, a car payment, a mortgage payment, student debt, and more. Life insurance is great when you have kids in that it can replace lost income from the parents. Life insurance can protect your business. If a business partner passes, insurance can cover the funds necessary to buy out shares and continue the business.
Term Life Insurance and Whole Life Insurance
There are 2 basic types of insurance term life insurance and whole life insurance. Term life insurance lasts for a set amount of years before expiration. In case of death prior to term completion, a set amount of money, known as a death benefit, is paid to the designated beneficiary. Whole life insurance is a permanent life insurance policy. It does not expire. There are a death benefit and a cash value that is a tax-deferred saving account included in the policy. The cash value accrues interest at a fixed rate. Every month, a portion of your premium goes into the cash value of the policy. This offers a guaranteed rate of return and the policy’s cash value grows over time. Whole life insurance can be five to 15 times more than a term life policy. Whole life is long-term permanent life insurance and lasts if you pay your premium. The cash value component makes whole life insurance a bit more complex than term life insurance because one must consider surrender fees (fees occurring when the policy is canceled), taxes, and other stipulations.
Humans have a natural fear of the unexpected. We like to believe that since we can plan and, in a sense, predict, that everything will flow smoothly. Covid-19 is a huge reminder that the unexpected can happen at any time. Not only are people losing loved ones, but some are also unable to work, others are caring for the sick, all while trying to provide for themselves and their families. Sit down and consider those who mean most to you. Will you be leaving them in a position to mourn without the burden of your financial past weighing them down? Think about it!