Portrait Of Family Group Tailgating In Stadium Car ParkWhen you’re just start­ing out, it often seems that a dol­lar nev­er stretch­es far enough. And with new com­mit­ments, such as buy­ing your first home or hav­ing chil­dren, comes the respon­si­bil­i­ty to make sure your loved ones will be pro­vid­ed for finan­cial­ly, no mat­ter what life may bring.

If you were to die unex­pect­ed­ly, life insur­ance is there to make sure your loved ones can main­tain their stan­dard of liv­ing, stay in your home, send your kids to the same schools and keep their plans for the future on track. It also gives the griev­ing spouse or part­ner time to make deci­sions, or in some cas­es find work out­side the home, with­out wor­ry­ing about finances.

But com­mon mis­con­cep­tions often pre­vent young fam­i­lies from pur­chas­ing the life insur­ance they need.

Myth 1: I only need life insur­ance if I’m the pri­ma­ry bread­win­ner in my fam­i­ly. Whether you bring home the largest pay­check in your house­hold or a small­er one, your fam­i­ly relies on your income to main­tain its qual­i­ty of life, and it would be missed if some­thing were to hap­pen to you. Even if you don’t work out­side of the home, hav­ing life insur­ance is a smart choice. Stay-at-home par­ents per­form valu­able ser­vices such as child­care, cook­ing, house­clean­ing and house­hold man­age­ment, which can be cost­ly to replace for a sur­viv­ing spouse or partner.

Stay-at-home par­ents per­form valu­able ser­vices such as child­care, cook­ing, house­clean­ing and house­hold man­age­ment, which can be cost­ly to replace for a sur­viv­ing spouse or partner.

Myth 2: If I buy a term life insur­ance pol­i­cy and find that I still need pro­tec­tion when the term ends, I can always renew the pol­i­cy. Term poli­cies are quite pop­u­lar with many young fam­i­lies, and for good rea­son: They typ­i­cal­ly offer the great­est cov­er­age for the low­est cost. Term insur­ance pro­vides pro­tec­tion for a spe­cif­ic peri­od of time (the “term”), and can be ide­al for peo­ple who feel they have finan­cial needs to cov­er that will dis­ap­pear over time, such as a mort­gage or a child’s education.

How­ev­er, many fam­i­lies real­ize that even after the kids are grown and the mort­gage is paid off, their need for insur­ance continues—to pro­vide income for a sur­viv­ing spouse, elim­i­nate debts, pay tax­es, etc. Because life insur­ance pre­mi­ums increase with age, renew­ing your pol­i­cy when the term expires can be very expen­sive. More­over, poor health may make renew­al impossible.

Myth 3: I only need term life insur­ance. Term life insur­ance makes sense for many young fam­i­lies because their need for cov­er­age is great and their bud­gets are often lim­it­ed. But that doesn’t mean it’s the only type of insur­ance you should consider.

Per­ma­nent life insur­ance poli­cies pro­vide a death ben­e­fit as well as oth­er unique fea­tures such as life­long pro­tec­tion and the abil­i­ty to accu­mu­late cash val­ues on a tax-deferred basis, sim­i­lar to assets in most retire­ment-sav­ings plans. You can access the cash val­ues for impor­tant uses like a child’s edu­ca­tion or a busi­ness oppor­tu­ni­ty. (Keep in mind, how­ev­er, that with­draw­ing or bor­row­ing funds from your pol­i­cy will reduce its cash val­ue and death ben­e­fit if not repaid.)

If these fea­tures appeal to you, it might make sense to buy a large face amount term pol­i­cy, giv­ing you the death ben­e­fit pro­tec­tion you need, and com­bine it with a small­er per­ma­nent pol­i­cy. When your bud­get per­mits, you can grad­u­al­ly increase your per­ma­nent insur­ance coverage.

 

Orig­i­nal­ly pub­lished by Life­Hap­pens — Read More