Why Is Life Insurance So Important?
Life insurance is one of the best ways to ensure that your loved ones are protected financially after you die. When you purchase a policy, you choose a certain amount of coverage: $50,000, $100,000, and $500,000 are just some examples of coverage amounts. The amount you choose depends on the needs of your loved ones. If you die early, will they have enough money to get by? Will you leave behind debt? What are their expenses? Life insurance ensures that your loved ones won’t be left in a lurch should the worst happen.
For your life insurance policy to be valid, you need to pay monthly premiums. Those premiums are determined by insurance underwriters who assess your health, lifestyle, and credit situation. People who pose a small risk of dying early get very low premiums. Those who pose a higher risk get higher premiums.
This is where the gift aspect comes in. Many people don’t get life insurance, not because they don’t recognize its importance, but because they can’t bear the thought of adding another expense to their monthly bills. Others truly can’t afford it. That’s why giving life insurance as a gift is wonderful. It’s not something that lasts for a week, a month, a year. It lasts for many years. Moreover, it gives the receiver peace of mind knowing that their loved ones will be covered in case of a tragedy.
Term and Whole
There are many different types of life insurance, but the two main ones are term and whole. Term life insurance is purchased for a certain amount of time: 5, 10, 15, 20 years, etc. The policy is valid for the term length. When the term ends, so does the coverage. Whole life insurance, on the other hand, is a type of policy that has no expiration date. It’s valid for your entire lifetime (as long as you pay the premiums). Whole life insurance also accrues a cash value over the lifetime of the policy and thus acts as an investment vehicle.
Many people choose term over whole for the simple reason of affordability. Term life insurance policies usually have lower monthly premiums than the whole. Even though they have an expiration date, they get the job done. People who buy them usually choose a term that will last them until they reach a certain milestone — paying off a mortgage, financing their youngest child’s college education, retiring. They feel that once they pass those specific milestones, they don’t need coverage anymore.
Discuss the Gift Before Giving It
Since there are different life insurance options and many personal considerations to take into account when buying it, if you plan to buy it as a holiday gift it’s a good idea to discuss it first with the person you’re buying it for. This way, you can understand that person’s situation, how much coverage they need, and get an idea of how much you can expect to pay each month.
Another reason to discuss it beforehand is that life insurance can be a sensitive subject. Even though it’s the most practical, thoughtful gift, it’s hard for some to face their own mortality. This is especially true if you’re an adult child who wants to buy life insurance for their parents. Though not exactly a taboo subject, it’s important to be sensitive. (Especially if you think you’ll be named as the beneficiary.)
If the potential giftee accepts your generous gift but isn’t sure what type of life insurance would be best, it’s important to consult with someone who can help. Sproutt insurance advisors are available to help you determine what kind of life insurance is best for you. Simply answer a few questions and we will find the best-value plan for your lifestyle, needs, and budget.