Life, as everyone says, is too short. And if you have a family of your own, love is the strongest feeling you have for them. Protecting them and making sure that they have enough for their needs is a priority because you love them. And love is always the best reason to ensure they are insured in case anything happens to you.
A Tale of Two Families
A Young Family
Nat and Sheila, both at age 21, married early. Nat worked construction, while Sheila was a full-time homemaker. The family budget did not exactly allow for yearly Caribbean holidays, but they managed the bills, the mortgage, and the car payments.
So when Nat wanted to squeeze in life insurance premium payments, Sheila objected at the onset, thinking they were too young to even talk about the death of either of them.
Four years later, with a nine-month-old baby in tow, she received the dreaded call from Nat’s coworker. It all happened in an instant, a freak workplace accident, she was told.
The life insurance check came in, Sheila never had budget problems, raised her child alone, until she established a career of her choosing and at her own timing. Nat never thought he would be gone too soon, but he thought of securing his beloved wife and child, out of great love.
A Single Mom with kids
Jenny, a twenty-year-old college student, was the oldest of three siblings. Her mom, long abandoned by a Dad they never knew, worked two jobs and was the sole breadwinner of the family.
While on a hike along a nearby river, her mom complained of nagging pain in her foot. Thinking it was just nothing out of the ordinary, they went home and rested early. The pain would become unbearable and her mother had to be rushed to the hospital.
She passed away the following day due to a pulmonary embolism. With only three hundred dollars ($300) in her mom’s bank account and no insurance to speak of, Jenny had to quit school and waited tables just to provide for her younger sisters.
Unable to keep up with the mortgage payments, their house was later on foreclosed. Her mother loved them deeply and sacrificed her own dreams to provide for the girls, she would not have wanted them to live such a life.
A Life Contract
They say that death would sometimes come like a thief in the night and strike when you least expect it, this sounds cliché up until a friend or a relative passes. Life is so uncertain. What can be assured is how we prepare for that unexpected future.
Life insurance has been defined as a contract between a life insurance policyholder and an insurer or a life insurance company. Under this agreement, the policyholder will pay premiums to the insurer, in exchange for an obligation on the part of the company to pay the beneficiaries of the insured individual a sum of money upon his or her death.
Certain events such as terminal sickness or disability may also prompt the payments, depending on the terms of the policy. There are exclusions, however, that limit the liability of the company to a certain extent. Such as those relating to suicide, fraudulent acts, wars, and civil unrest.
In simpler terms, insurance acts as a safety hedge for a family’s finances should a breadwinner suddenly lose the ability to earn a living. It pays a predetermined sum of money to your loved ones or chosen beneficiaries. It also means being able to live the same quality of life despite the loss or disability of the head of the family.
On the part of the insured, he is actually paying for something that he most likely will not reap the benefits of. He is actually doing it because he loves his family and is willing to look beyond his own personal benefit and comfort just to secure the future of his loved ones. There are policy contracts where an insured can cash in if he outlives the policy period, in this case, the proceeds could act as a retirement fund.
In the face of such stark reality, 2019 data showed that less than sixty percent (60%) of Americans have life insurance. Of this figure, only a third have adequate coverage, once we factor in considerations such as family lifestyle, inflation, and adjustments in the cost of living in the future.
When asked about the main reason for securing protection, the top answers include coverage for final expenses such as hospital bills and funeral expenses, paying off debts like mortgages and loans, and income replacement on the part of the breadwinner.
Sadly, some forty percent (40%) of families of uninsured breadwinners, or in this case seventy percent (70%) of the underinsured ones are left with a terrible alternative – financial ruin to a certain extent. There is no middle ground.
Other common reasons for securing insurance include Long Term Care. In the event that you outlive your insurance policy, the cash value may be used to pay for home health care or assisted living in a nursing home. There is also the matter of settling Federal Taxes.
If your estate’s value exceeds the exemption allowed for by law at the time of your demise, there is a federal estate tax due. Insurance pays for that. The fund may also guarantee an inheritance to a beneficiary heir. Even in your death, you may still provide for and let your beloved feel your love and care.
What are my options?
The first step is to assess the need. Would you need short-term coverage of a long-term one?
For the former, a Term Life Insurance would suffice. For those who would want more long-term protection, but are short on budget, Term would make do for the meantime just for you to be covered but as your finances would later allow, an upgrade or top-up would be in order.
For long-term coverage, there’s Permanent Life Insurance which secures the remainder of the lifespan of the insured. Under this plan, a cash value is accrued up until the date of maturity. The policy owner may withdraw some of the cash value, borrow from it, or he may choose to surrender the policy completely and receive the cash value to date.
A Permanent Life Insurance falls into two types depending on your chosen premium payment method. The first one is a fixed amount of premium payments and is called Whole Life Insurance.
On the other hand, there is Universal Life. This is where premium payments are much more flexible as they are adjustable. On the side there is also a potential for more growth in cash values as part of the premiums are invested in stocks, bonds, and/or mutual funds.
Dispelling the Rumors
We live in a generation of blazing-fast information transfer and dissemination. In spite of all this, there will always be misinformation and misconception. Such is applicable to the insurance industry.
Yes, insurance matters can be tricky and too technical, but that is where insurance specialists and financial advisers come in.
As this partnership is one of confidence and trust, make sure you team up with an adviser that you are comfortable dealing with. Referrals from satisfied clients are key to narrowing down your choices.
The following are the more common insurance myths:
- I am young and single and do not need insurance. Well, at the very least, you will incur hospital bills and funeral expenses. Unless your bank account or assets can cover these, you will leave a legacy (not to mention the burden) of unpaid bills to your next of kin.
- My insurance coverage should approximately be twice my annual pay. Yes, it’s an easy way of computing for it, but realistically, we should be taking into account unpaid bills and expenses, debts, and any future family needs to come up with a better picture.
- I have enough assets so I don’t need insurance. For starters, there are estate taxes to settle. The more assets you leave behind, the more taxes are due and demandable from the deceased’s estate.
- Universal life is superior to a straight-up whole life. It is true that there is potential for increased cash value as your investment drives it, but it could also be the other way around. A crash on the value of the investments may also drain your cash values.
- Only the breadwinner needs to be insured. Not entirely true. A housewife, doing chores and taking care of the children is doing a huge service to the family. In the event of her demise, these services need to continue. The breadwinner, much as he wants to perform these functions, cannot just divide his time between earning a living and doing housework. He needs to hire someone to clean up and babysit. And these cost money, as well.
When in Doubt
For any insurance concerns, there’s really no need to sweat out the small stuff. You simply pick up your phone and talk to the experts. Whether it’s life insurance, homeowner protection, automobile coverage, or you simply want to brainstorm possibilities with insurance specialists, a timely call for help will never be wrong.
So if you need sound advice, don’t hesitate to contact us. We will always be there to make your life hassle and stress-free by finding the perfect solution for your insurance needs.
At Advantage Insurance Solutions (AIS) we can assure you of great value protection for individuals, families, and businesses in Denver, Colorado, and over 40 other States. We help you choose the best carrier for your insurance needs and offer you peace of mind.