Quite frankly, I am tired of doing fish fries, cash apps, or seeing gofundme set up because that person did not have life insurance set up or did not have adequate life insurance set up, especially if they have a spouse or Kids or both.
There are many reasons why you need life insurance, and these are only five of them that I will point out.
Summary:
- While You’re Healthy
- Your Kids Are Expensive
- Kids Education
- Your Spouse Living Expenses
- The Prevention of Fire Sales
What is Life Insurance
Before we get into the reasons, what is life insurance, for those who may not know.
In a nutshell, life insurance is a policy that the insurer and policy owner have together, where the insurer pays a set amount of money to the beneficiary or beneficiaries of the insured deceased.
The insured beneficiaries receive this money because (like all insurance) they paid a monthly, quarterly, or yearly premium to the policyholder while the insured was alive.
To determine how much the insured must pay each month, that person must disclose any health conditions, current or past. Also, disclose any high-risk activities such as drinking excessively or smoking.
Three Key Points
- To keep your life insurance policy, the insured must pay a certain premium either monthly, quarterly, or one upfront price for the year.
- Life Insurance is a legally binding contract that pays the beneficiaries of the insured deceased.
- A permanent life insurance policy stays in place until the insured dies. Term Life insurance policy expires after a certain number of years; the insured stop paying the premium or cancels the policy.
Two Types of Life Insurance
Term Life Insurance: This insurance lasts a set number of years. The most common being 10, 20, or 30 years.
- Decreasing term
- Convertible term
- Renewable term
Permanent Life Insurance: This insurance is enforced for the entirety of the insured life unless the insured stop paying the fee or cancels the policy.
- Whole Life
- Universal Life
- Index Universal
- Variable Universal
Plenty of life insurance policies can fit your needs, but the cheapest will always be getting insurance when you are healthy. Also, talk to your current insurance agent about the different policies that you could qualify for.
Now let’s get why you NEED life insurance.
WHILE YOU’RE HEALTHY
Having insurance ensures your insurability to your family. Meaning. . .
While you are healthy (mentally and physically), you ensure that you can get insurance for the cheap as well. While you can qualify for it.
If something happens to you tomorrow in which you could not qualify for insurance at all, you could, at the minimum, have it now for any future events.
YOUR KIDS ARE EXPENSIVE
If you have kids (3) like me, if nobody else, please do it for your kids.
Children are crazy expensive. The USDA estimates that each child will cost an estimated $233,000. So, if you have one kid, $233k that’s quite a lot of money. I have three kids, and that’s almost pushing $700,000 in taking care of your kids up until 17. This does not include college.
That does not include if your child is not healthy, for instance, down syndrome, autism, etc. You’ll want that money for someone to continue caring for your kids(s) when the inevitable happens.
KIDS EDUCATION
Your kids, college education savings plan.
Yes, we are talking about kids again, but in another aspect. Now, it doesn’t matter if you’re not saving, and you’re going to keep it up, or have you already started saving? This is a huge, huge goal.
Inflation for schools is at 8%. This is lower than today’s inflation, which is currently (9.1%), but still high, so let’s examine some of these costs. So, if we’re looking at somebody born today (2022) and attending the University of North Carolina (out of state), it’s an excellent school.
$36159 is how much money you will need yearly, and if we inflate that out, we’re looking at over $651,000. So, you need that life insurance just in case you do not have that money saved before passing away.
Look at that first year, 2040 for that year. The first year is keeping up with the inflation year, showing that the first year is $144,492 Cost vs. $36,159 currently.
As you can see, it continuously rises. So, this neat little calculator is taking the cost of actual colleges today—the price of colleges today and inflating them.
The thing to understand is the rapid inflation of schools and saving for it. You want to ensure that gap is protected, so you might be doing everything right, saving for your kid’s college education, but that’s a massive expense.
It almost just as much depends on where you go as it is to raise them, which immediately doubles the cost.
Your SPOUSE’S Living Expenses
Spouse living expenses. These expenses could change so drastically. But if you look at the spouses’ living expenses, whether one person works or it’s a dual-income household.
Whatever the structure is, most people get comfortable and adapt to their current income lifestyle.
Whether we think we can adjust to the loss of a spouse, there’s a grieving period and adjustment, and those periods can be financially catastrophic.
The Prevention Of ‘Fire Sales’
To Prevent a fire sale, just in case of your untimely death.
So, what’s a fire sale? We call it a fire sale because that asset must sell quickly, usually at a discount. Say, we are losing the support, and now we’re selling it for much less than it’s worth.
Let’s say there is a debt payment, such as a mortgage, another debt on your house, or any other asset you own. If the beneficiary doesn’t have cash or doesn’t have access to money, they might lose the support you worked hard to pass along.
To close this gap, you can look at life insurance specifically to pay off some of those debts, especially when linked to an asset you want to transfer.
In Conclusion
You may need life insurance for many different reasons, and it could take on different meanings for you and cover other things over time.
Bottom line, look at your life insurance coverage. Make sure it’s enough. If you’ve enjoyed this article and it has brought value, subscribe and leave your comments at the bottom.