| Life Insurance: Problem or Problem Solver? |
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| PERSONAL FINANCE | |||||||||||||||||||||||||||
| Written by Sean Pollock | |||||||||||||||||||||||||||
| Monday, 16 June 2008 21:59 | |||||||||||||||||||||||||||
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More specifically, life Insurance policy is a promise made by the insuring company to pay a specified sum to the person you have identified as the beneficiary of your policy, if you die. With this promise you get a peace of mind that your loved ones will be taken care of even if you are not there for them. For this peace of mind, you have to pay a premium on a periodic basis. It can be paid monthly, quarterly or annually, depending on your choice. This premium is usually what we consider the problem with life insurance. But let's think about this practically. What types of problems do we leave after we die? Mortgages, college expenses, needs of income so a caretaker can stay home with young children are all examples of problems left upon death. These are some very real reasons to consider some form of life insurance. Take a look at the average American family that wouldn't think they need it. Alex and Kate are in their early 30s, both are in great shape and have been married for seven years. They are excited that they have started a family with Brian, 2 years old, and a second baby on the way. Alex prides himself on the fact that he can afford to have Kate be a stay-at-home mom; something the couple agrees is essential in raising children. They live in a nice community and belong to the country club where Alex networks on the golf course and Kate enjoys summers at the pool with the kids and their friends. This is a couple in the wealth building stage of life, thinking about retirement and college planning, but certainly not death. That is until Brian was in a serious car accident on his way home from work one night. Luckily he survived only leaving his family with a scare - not only of losing a loved one, but also of losing the breadwinner of the family. Without his income, Kate would have to sell the house, put the kids in daycare, get a job and leave her social network because she couldn't afford the country club. Not only would she have lost the love of her life and her children's father, but she would have been forced to contradict what they both wanted for their children: mom at home raising them. By examining their income needs, this family realized that if something happened to Brian, they would need an income source to cover their largest expenses: mortgage, car, social lifestyle as well as money that needs to be saved toward college for the kids and retirement for Kate. Understanding needs can help to determine the exact type and amount of life insurance a person needs. The one thing that makes it extremely attractive is that life insurance benefits have tax benefits - a much more powerful tool than just leaving money in the bank to your kids! If you are not good at saving, life insurance can be a way to help you save on top of its main benefits and primary uses. Ironically, life insurance is one kind of a product, whose benefits you will never be able to see while you are alive. You pay now for something that gives you a result only when you are no more. But it does provide peace of mind that your loved ones are protected equally now and after you pass away. 
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We all know we need it yet we avoid it like a root canal - the ever-dreadful life insurance. Its purpose is simple, to provide your family a means of support in the event of your death. Essentially it's a safety cover around your family, allowing them to live a comfortable life if you are gone.
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