Life insurance is one of those things that we kind of know we need but many of us don't want to deal with getting it right away. Sometimes it's hard to even think about life insurance because, for many people, the whole idea of getting life insurance is just plain scary. However, we can't downplay the importance of life insurance.
Perhaps, you feel like you are young and have plenty of time or you even feel like, if something happened to you, there would not be any major financial impact. Or maybe you can't decide what insurance type would work best for you. For instance, do you need term vs whole life insurance?
Well if you've ever felt any of the above, this article is here to help you understand the importance of life insurance and how to ensure you are covered.
The importance of life insurance and why it matters
Life insurance is not something to be afraid of at all. Instead, look at it this way; Having life insurance is protection for you and your loved ones that can minimize or potentially eliminate financial distress.
And it's something you want to seriously consider. Especially if you have kids or dependents who rely on your income, have shared financial obligations with a significant other, have debts like a mortgage or student loans, are a stay-at-home parent, or want to leave something to your kids.
Yup, life insurance is one way in which people transfer their legacies and create generational wealth. Having life insurance is a foundational element of your financial plan.
For instance, as a mom of two small children with a small business, I have a huge impact on my family's financials, and it's not just tied to the money I bring in with my business. It's also from the cost of all I do in my household. But keep in mind, that you don't need to have a million dollar life insurance policy.
Having enough to cover what you bring to your family is a good start. Let me explain!
The cost value of all you do and how insurance ties in
One day I sat down to really calculate the cost value of all I do for my family and I was surprised. Shocked even. I added in all my jobs. They include:
- Watching and teaching my kids (Job title: babysitter/teacher).
- Cooking for my family (Job title: chef).
- Cleaning my home (Job title: housekeeper).
- Driving my kids around (Job title: car service).
After all of this I determined that if I were to hire pep[le to do all of these things that I currently do for my family, it would cost me over $70,000 a year!
This alone is a huge financial impact if (God forbid) something were to happen to me. And I didn't even include my other annual financial obligations, for instance, my kids’ tuition or our household bills and mortgage.
This is why life insurance is a non-negotiable for me. My 20-year, $500,000 term life insurance policy will help ensure my family is protected financially and can help to cover several years of the loss of my value and income.
My husband also has a life insurance policy in place as well since he also contributes substantial income to our family. If you are the sole or primary breadwinner then putting yourself in this scenario makes having life insurance even more critical for you.
Life insurance and your long-term goals
What are some of the biggest long-term financial goals you currently have? Personally, I’m saving for retirement and my kids’ college education. I have a vision of exactly how I want to retire in my head that I need to get to. I
n addition, similar to the gift my parents gave me, my husband and I have decided that we will be paying for our kids’ college education in full, wherever they choose to go. (As well as imparting financial literacy to my children).
But again, if something were to happen to me, these goals could very well be thrown out the window if both my spouse and I don't have a life insurance policy in place.
This could mean a difficult retirement for me or my spouse and student debt for my children. All scenarios I don't want, and that’s why I recognize the importance of life insurance, in addition to my savings and investments, as a safety net.
Make the process of getting life insurance simple
The truth is life can be hard and unexpected situations happen but it's better to have a plan in place, and one key element of your plan should be getting life insurance, and it doesn't have to be a complex process.
The first place to start would be to determine whether you need term vs. whole life insurance that includes a cash value. If you decide on term life insurance, then you'd need to research the best one for your needs. The same applies to whole life insurance.
There are several online providers that offer life insurance and a quick Google search yield results and supporting reviews. You can also take some time out to contact your local insurance provider to have a conversation about what you might really need.
Be sure to shop around to compare policies and rates before you make a final decision. Ultimately, you want to have peace of mind knowing that your loved ones will be taken care of. Finally, be sure to review the other types of insurance you might need outside of life insurance.