Term Life Insurance - Are Your Protecting Your Family?
By Charles Hopkins
Published 05/18/2006 | Finance
Why do we turn a deaf ear when we hear the words life insurance? While nobody wants to contemplate a scenario that would require you to use it, have you ever envisioned your life or your familys life if the worst was to happen and you didnt have insurance?
Do I Need Life Insurance?
The purpose of life insurance is to guarantee an income to your spouse and children if you were no longer able to support them. This is the scenario you should think about; if something happened to you today would your family be able to live in their current home? Would they have enough money to maintain their current lifestyle? Would the cost of a funeral become a burden? Would the remaining spouse be able to support the family with little stress or would the combination of financial burden and loosing you cause unendurable hardship for them?
If you have saved and invested and prepared in other ways, you may feel certain that despite dealing with grief your family would have no financial concerns. But that is rare. Young families especially are at a disadvantage when debts are high, responsibilities for caring for children are costly, income may not have reached its full potential or one partner is no longer bringing in an income and in most cases savings are low.
This is the scenario that requires a family to purchase term life insurance.
Why Should I Get Term Insurance?
Term life insurance is the most inexpensive form of life insurance. It is priced based on your age and health and is usually purchased in terms of several years 1, 5, 10, 20 or anything in between. This form of insurance will provide the highest coverage for the lowest premiums.
While term insurance is not ideal for older individuals since the price goes up substantially with age, it is the perfect solution for younger couples or families who have high debts including mortgages, life expenses and dependants. The insurance can cover you while your children grow and the mortgage is paid off. When the policy expires you should have invested, paid down your debts and no longer have dependants.
Who Needs to be Covered?
Since insurance is actually income protection providing money if you cannot you need only cover the individuals who contribute to the family financially. First and foremost the MAIN income earner needs coverage. If the main income disappeared it would be crucial for the insurance to cover the needs of the family.
Second, if any secondary income is relied on to cover expenses that person should also have an insurance policy. This includes the main caregiver if that person is a parent or unpaid family member. Why? Even if they dont contribute an income, if they were not caring for the children you would have to pay someone else to do it. Insurance would cover that additional cost.
Third, only if you cannot afford funeral expenses (generally about 5000) should you take out an insurance policy on your children. There is no reason for children to otherwise be insured as they do not contribute to the family income.
Now You Know
If you havent taken the time to understand the purpose of term insurance, now you can decide if it is in the best interest of your family to provide this protection. It will give you peace of mind and make all the difference to your family in a time of need.