For those in the Armed Forces, protecting their country is the priority. But that's on the job: When at home, those same servicemembers strive to protect and provide for their families. You want to make sure that your family is taken care of should the worst happen, but that can be difficult without life insurance.
Life insurance can seem like a complicated product, but it's essential to ensuring peace of mind in the most difficult of times. If your family happens to lose your income, how would they meet obligations like mortgage payments and debts? If you have a life insurance policy, your family will enjoy a degree of protection against such costs. To help educate the public, September is Life Insurance Awareness month. Here are a couple facts you need to know.
What is life insurance?
Like other forms of insurance, life insurance protects policyholders against damages and losses. In this context, should you pass unexpectedly, your family will have a fall-back in the death benefit life insurance pays. You can take out a certain amount of coverage (whether $25,000 or $250,000) that will help your family maintain financial stability when they need it most. The advantage is the death benefit is often paid out to your family, or other designated beneficiaries, free of income tax.
What types of life insurance exist?
Life insurance products break down into two main groups: term and whole. Term life insurance policies are active for a set number of years, like 15 or 30 years. Your family will be covered during that time, but once the term expires, so does coverage. Many families utilize term plans for household planning for near-term needs, in addition to creating a financial backstop. Term life policies often feature variable rates and the ability to convert coverage to a permanent option.
On the other hand is whole life insurance. These policies grant a lifetime of coverage with the first payment. As long as you meet premiums, your family will benefit from coverage that won't expire. Another key advantage is cash value. With whole life policies, a portion of the premium you pay each month is diverted toward a fund that you can draw from and pay back, or take loans against. Cash value builds with each premium, but just be aware that any amount you take out will be deducted from the eventual payout your beneficiaries receive.
Why take out life insurance?
The overarching reason why many families obtain life insurance is to provide a financial buttress against uncertainty or costs. For instance, funeral expenses are a major outlay, but life insurance often addresses those costs directly as part of the policy. When you sit down to research policies, consider what life insurance can be used toward, including:
- Mortgage payment: If you have 10 years left on your mortgage, you may want to take out a term life policy of the same length to ensure paying it off stays on track.
- Personal debts: Your family may be held for any personal debts you held. Life insurance protects them against those costs.
- Higher education: Tuition and housing take a major chunk out of household budgets, but a policy will make sure such costs are met and degrees can be obtained even if your income is lost.
- Medical bills: Many policies will have an option to pay out living benefits for chronic or terminal illnesses, which can decrease your costs.
Learn more during September
If you are interested in more about life insurance and how it can help your family, consider getting involved this September. Education events and financial literacy seminars are taking place all over the country during Life Insurance Awareness Month, so check out what's happening your area.