Family is a top priority for many people, which makes taking care of and protecting family members second nature to those with loved ones at home. While many people think about caring for and protecting their loved ones while they are alive, it’s important to consider how your family will continue their lives without your financial contributions.
If you die, your loved ones will still need to pay bills, rent or a mortgage and put food on the table. Life insurance allows your loved ones to maintain their standard of living, even if something happens to you.
What Is Life Insurance?
Life insurance is a contract between you and an insurance company. In exchange for paying premiums to the insurance company while you are alive, the insurance company will provide a sum of money called a death benefit to your beneficiaries after your death.
The size of your death benefit determines what you will pay in premiums. More coverage will cost more money but can help ensure that your loved ones do not struggle financially.
What Are the Benefits of Life Insurance?
An individual can use life insurance to provide their family with the funds for necessary expenses like funeral and burial arrangements, or an attorney to finalize your estate.
Here are some other life insurance benefits:
Raising children and maintaining a home can be difficult for a single parent. Life insurance can help alleviate that burden. When used judiciously, a life insurance payout can replace years of your missing income, or pay off your home’s outstanding mortgage–effectively lowering your family’s cost of living.
A generous death benefit can tide your spouse over until they can adjust to living on a single paycheck.
Education is expensive, and student loan debt may persist for years after graduation. However, life insurance can make a considerable dent in a spouse or child’s education expenses. Regardless of your child’s age, a large enough policy could help pay for private school, college education or both – alleviating a significant financial stressor for many families.
If you would like to leave funds to a particular family member, you can use your insurance policy’s death benefit as a form of inheritance. You can also designate multiple beneficiaries and distribute their death benefits in any percentage.
If you have aging parents or parents who need care and rely on you for financial or physical support (performing chores, assisting in daily activities or driving them to and from appointments), you could use the proceeds from your life insurance policy to continue caring for your parents even after your death. Your death benefit can help pay for a nursing home or in-home health care. You could also leave it for your parents to use at their discretion.
Are There Multiple Types of Life Insurance?
There are two types of life insurance: term and permanent.
Term life insurance lasts for a set length of time, called a term (often ranging from five to 30 years). It provides protection only if the insured passes away during the selected term. If you choose term insurance, you will pay a monthly premium – typically based upon the age and health of the insured, the term length, and the amount of coverage – for the duration of the term, unless you die during it.
Premiums for term insurance are often less expensive than those required to maintain permanent insurance coverage. You may also be able to upgrade term coverage to permanent coverage at specific points during the term, depending on your life insurance policy.
Permanent life insurance provides coverage for the insured person’s entire life and pays a death benefit to the beneficiaries listed after the insured person dies, regardless of the timing. Permanent life insurance policies also have a cash value component, in which money may accumulate and grow over time. While the insured person is alive, the policy owner can borrow against the policy’s cash value or possibly make withdrawals to meet financial needs – depending on the policy.
Permanent life insurance policy owners must pay premiums in exchange for the insurance coverage. Premium payments may continue for a set period of time (e.g., 20 years) or for the duration of the insured person’s life.
It is also possible to accumulate enough cash value in your life insurance policy to deduct premiums from your balance, instead of making additional payments.
Service members put their lives on the line to protect our country. While life insurance cannot alleviate grief, it is one way that a service member can protect their loved ones from feeling the full financial impact of their loss. Navy Mutual has affordable insurance plans tailored to service members and their families. You can get a quote online or call us at 800-628-6011 to get started. We have your back.