It’s not something anyone wants to think about, but being prepared for unexpected, tragic life events helps take some of the financial burden off your loved ones and dependents. In this guide, we explore what it covers, who needs it, the benefits of life insurance and common misconceptions that lead some to wrongly think they don’t need this type of policy.
What is Life Insurance?
Life insurance is a financial safety net that provides monetary support to beneficiaries after the policyholder’s death. It serves as a crucial component of long-term financial planning, offering protection and peace of mind for you and your loved ones.
Benefits of Life Insurance
Should the worst happen to you, life insurance offers peace of mind and security that your family and dependents will have the financial support they need. We’ve listed some of the notable benefits of life insurance to help you decide if it’s right for you.
1. Financial Security for Dependents
- Replaces lost income for families
- Maintains standard of living for surviving dependents
- Covers daily living expenses and long-term needs
- Ensures children’s education costs are covered
- Protects stay-at-home parents by covering the cost of services they provide
2. Debt and Expense Coverage
- Pays off mortgages and other outstanding debts
- Covers funeral and burial expenses
- Handles medical bills and estate settlement costs
- Prevents passing financial burdens to family members
- Protects co-signers on loans
3. Estate Planning Benefits
- Provides tax-efficient wealth transfer to heirs
- Helps avoid estate taxes in certain situations
- Creates inheritance for beneficiaries
- Enables charitable giving
- Facilitates business succession planning
4. Additional Living Benefits
- Some policies build cash value over time
- Possible source of emergency funds through policy loans
- May offer living benefits for chronic or terminal illness
- Can be used for retirement planning
- Provides collateral for loans
Who Needs Life Insurance?
There are many people that should consider getting a life insurance policy, including:
- Main income earners in families
- Single parents
- Business owners
- Self-employed individuals
- High-income professionals
- Stay-at-home parents
- Young couples starting families
- Mortgage holders
- People with dependent elderly parents
- Those with special needs dependents
Types of Life Insurance Coverage
Getting to know the different types of life insurance coverage will help you narrow down your search. The two main types of cover include term and permanent, which we’ve listed below.
But don’t think you have to choose without some help. Insurance brokers, like Agentis, are there to offer guidance and find the right policy for your requirements. A good broker will strike the right balance between getting affordable, appropriate cover with a provider that has a user-friendly claims process.
Term Life Insurance
- Provides coverage for a specific period
- Lower initial premiums
- Simple and straightforward
- Best for temporary needs
- Convertible to permanent insurance
Permanent Life Insurance
- Lifelong coverage
- Builds cash value
- Higher premiums
- Various investment options
- Multiple policy types (Whole, Universal, Variable)
Considerations When Purchasing Life Insurance
Working alongside a reputable insurance broker, they’ll help narrow down your options to secure the right life insurance policy.
Coverage Amount Factors
- Current income and future earning potential
- Outstanding debts and obligations
- Number and age of dependents
- Education costs
- Lifestyle maintenance needs
- Inflation considerations
Policy Selection Criteria
- Budget constraints
- Length of coverage needed
- Investment objectives
- Health condition
- Occupation and lifestyle
- Company financial strength
Common Misconceptions
There are many misconceptions around life insurance, one of them being that it’s only for older people.
“I’m Too Young for Life Insurance”
There are several reasons to purchase life insurance while you’re young and healthy. Premiums are significantly lower at a younger age, and you lock in your current health status to ensure insurability should your health decline in the future. Additionally, the consistent payment schedule of a life insurance policy helps build financial discipline, and it protects your future insurability regardless of any changes in your health or lifestyle.
“I Have Group Coverage Through Work”
Employer-provided life insurance may not adequately protect your family’s financial needs and you’ll often have limited policy options.
Additionally, these policies are typically not portable, meaning you lose coverage if you change jobs. This lack of portability can leave you without protection during crucial periods, such as when searching for new employment.
Employer-provided policies may terminate with your employment, leaving you without coverage unexpectedly.
“It’s Too Expensive”
If the expense has put you off in the past, it may be helpful to know there are many affordable life insurance options available (if you know where to look). Term life insurance, in particular, can be very cost-effective. However, it’s important to remember that premium costs will increase as you age, and any health issues that arise later in life could also increase your costs.
How can an insurance broker help?
There are three steps an insurance broker will take to find the right policy for you. From assessing your unique requirements to researching your options and helping you make an informed decision, discover more details about what’s involved.
1. Assess Your Needs
- Calculate required coverage
- Consider future obligations
- Account for inflation
- Review existing coverage
2. Research Options
- Compare different policy types
- Get multiple quotes
- Check company ratings
- Review policy features
3. Make an Informed Decision
- Choose appropriate coverage
- Select a reputable insurer
- Understand policy terms
- Plan for regular reviews
Discuss life insurance with an insurance broker today
Life insurance is a fundamental component of financial planning that provides essential protection for loved ones. The right policy can ensure financial security, maintain living standards, and provide peace of mind. Speak to the team at Agentis today to discuss getting a life insurance policy today. We offer free initial consultations and offer appointments over the phone, video call or in-person.
