Why should I have life insurance?
Many people have the same question, “Why should I have life insurance?” If you have a family that you care about deeply and you help in providing an income to support them, this should be an easy question to answer.
Think about your current family situation: the cars you drive, the activities your children are involved in, and the house you live in. Now take yourself and your current income out of the equation. No sum of money can ever replace a cherished relationship, but what would your family face financially? Would your children still participating in the same activities? Would your wife/husband still driving the same car? Would your family still be able to enjoy their home they have been living in?
Many people are not in a financial situation to maintain their current lifestyle if one of their sources of income abruptly comes to an end. This is where life insurance comes in. With a life insurance policy you can make sure your family has the financial resources available if something were to happen to you.
It is most common for the “bread winner,” or the person with the primary source of income, to be insured first. Imagine a pyramid of insurance needs. Maslow created his famous hierarchy of needs. In essence, he said that you wouldn’t want to become a political theologian while neglecting to find enough food and water to survive. In the life insurance game you wouldn’t want to overlook the fundamental value of the primary bread winner either.
Now let’s say you have a spouse who works at home. This spouse’s job includes taking care of the children, preparing meals, grocery shopping, looking after the home, and other time consuming activities like driving the kids to various places and doing laundry. Does a work-at-home spouse also have financial value? Many people miss this key point. Not only would the loss be emotionally devastating to the family, in many cases it is also financially devastating as well.
In the weeks following the death of a work-at-home spouse, family and friends will volunteer to care for the children, watch over the household, etc. Eventually those who have helped will have to go back to their normal lives. The surviving spouse will then have to find an alternate way to care for the children and work all at the same time. With the cost of child care, home care, and preschool the surviving spouse may become financially strapped, and unable to provide these cares for the children. This is why it is also important to consider looking at life insurance for the work-at-home spouse as well.
The two most basic types of insurance are whole life and term.
The most common benefits to life insurance are:
- Leave money to your family or friends. When purchasing life insurance, you designate beneficiaries (the people who will receive money if you pass on). You can designate 1 or 100 beneficiaries in varying amounts, which provides nice flexibility.
- You will have a better plan for the future. A plan is better than no plan. You can prepare for the future by establishing a system that will address future needs.
- Provides a vehicle for investment. More about this topic will be covered later.
The most common disadvantages to life insurance are:
- It costs money.
- It can take some time to figure out which plan or policy to go with. You might not know who to talk to or which company to go with. Like anything else, it’s easy to put it off.