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Here's How 59% of Americans Are Putting Their Loved Ones' Financial Future at Risk

If you have a spouse or children, you probably want nothing more than to provide for them and protect them. But if you don't have life insurance, you're effectively doing nothing to ensure that they're taken care of in the event of your untimely passing.

Only 41% of Americans have a life insurance policy, according to a survey released earlier this year by financial services firm Edward Jones. Furthermore, 32% say that life insurance is low or nonexistent on their list of priorities when starting a family.

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If you're without life insurance, know this: Without a policy, your loved ones could be left in the lurch if you were to pass away unexpectedly. Furthermore, you don't need to be rich to need life insurance; you just need to have people who depend on you financially, or who stand to get hurt financially if you were to pass. With that in mind, here a few additional things you should know about life insurance.

1. Term life is more cost-effective than permanent life

Life insurance falls into two main categories. As the name implies, term life insurance covers you for a specific period of time -- generally 20 or 30 years. Permanent life insurance, on the other hand, covers you until you die. Permanent life insurance is, therefore, far more expensive than term life, since it offers a greater degree of protection.

But that doesn't mean you need a permanent life insurance policy. If you're married with children, you may decide that you want coverage to last you until retirement age, at which point your kids will be grown and out on their own, and your spouse is entitled to Social Security coupled with access to your IRA or 401(k). If that's the case, then a term life policy might make more sense, especially if it saves you money on premium costs along the way.

2. Permanent life insurance can double as long-term savings

Unlike term life insurance policies, permanent life policies accumulate a cash value as you pay into them. So, they can double as a savings mechanism of sorts. That's because you'll have the option to cash out your policy later in life if you so choose. In doing so, you'll surrender your death benefit, but you might decide at a certain point in life that you want the money immediately, and with a permanent life policy, you'll have the option to do just that.

3. Just because you don't work doesn't mean you don't need life insurance

Many people assume that if they don't actually earn a living, there's no need for them to get life insurance. But if you're a stay-at-home parent, you should strongly reconsider. Even though you don't earn an actual income, the fact that you provide care to your children so your spouse can work has a financial value. Or, to put it another way, if you were to pass away, your spouse would need to absorb the exorbitant cost of child care without help. And that's not a burden you'd want to leave your family with.

4. You can take steps to keep your premiums more affordable

Many people assume that life insurance is prohibitively expensive, but there are things you can do to keep your premiums manageable. First, apply when you're relatively young and in good health. Next, as mentioned earlier, opt for term life over permanent life. Additionally, don't overbuy coverage. You probably don't need a $2 million policy if you're the sole breadwinner in your family and earn $60,000 a year. Rather, a policy a third of that size might serve your family's needs quite well.

The longer you go without life insurance, the more you put your family at risk. If you don't have a policy in place, carve out some time to explore your options.

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The Motley Fool has a disclosure policy.


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