How Life Insurance Can Affect Your Finances

How Life Insurance Can Affect Your Finances

How Life Insurance Can Affect Your Finances

One of those things we kind of know we need is life insurance, but many of us don’t want to deal with the hassle of getting it right away. It might be challenging to even consider life insurance because, for many people, the concept of purchasing life insurance is downright terrifying. We cannot, however, minimize the significance of life insurance.

You might think that you are young and have lots of time, or even that if something were to happen to you, it would not have a significant financial impact. Or perhaps you are unsure of which sort of insurance would be most suitable for you. Consider if term or full life insurance is necessary.

So therefore, if you’ve ever felt any of the above, this article is here to help you understand the importance of life insurance and how to ensure you are covered.

The major importance of life insurance and why it matters

There is absolutely no reason to be terrified of life insurance. Instead, consider life insurance as a form of security for you and your loved ones that can reduce or even completely remove financial hardship.

And you should give it some serious thought. Especially if you are a stay-at-home parent, have dependent children or other people who depend on your income, have joint financial commitments with a significant other, have debts like a mortgage or student loans, or wish to leave something to your children.

Yup, life insurance is one way in which people transfer their legacies and create generational wealth. Having life insurance is a foundational element of your financial plan.

For instance, as a mom of two small children with a small business, I have a huge impact on my family’s financials, and it’s not just tied to the money I bring in with my business. It’s also from the cost of all I do in my household. But keep in mind, that you don’t need to have a million dollar life insurance policy.

Having enough to cover what you bring to your family is a good start. Let me explain!

The basic cost value of all you do and how insurance ties in

For sure, one good day I sat down to really calculate the cost value of all I do for my family and I was surprised. Shocked even. I added in all my jobs. They include:

  • Watching and teaching my kids (Job title: babysitter/teacher).
  • Cooking for my family (Job title: chef).
  • Cleaning my home (Job title: housekeeper).
  • Driving my kids around (Job title: car service).

And then after all of this I determined that if I were to hire pep[le to do all of these things that I currently do for my family, it would cost me over $70,000 a year!

Also, this alone is a huge financial impact if (God forbid) something were to happen to me. And I didn’t even include my other annual financial obligations, for instance, my kids’ tuition or our household bills and mortgage.

And yes, this is why life insurance is a non-negotiable for me. My 20-year, $500,000 term life insurance policy will help ensure my family is protected financially and can help to cover several years of the loss of my value and income.

My husband also has a life insurance policy in place as well since he also contributes substantial income to our family. If you are the sole or primary breadwinner then putting yourself in this scenario makes having life insurance even more critical for you.

The life insurance and your long-term goals

The question now is that what are some of the biggest long-term financial goals you currently have? Personally, I’m saving for retirement and my kids’ college education. I have a vision of exactly how I want to retire in my head that I need to get to. I

Then in addition, similar to the gift my parents gave me, my husband and I have decided that we will be paying for our kids’ college education in full, wherever they choose to go. (As well as imparting financial literacy to my children).

But again, if something were to happen to me, these goals could very well be thrown out the window if both my spouse and I don’t have a life insurance policy in place.

Surely this could mean a difficult retirement for me or my spouse and student debt for my children. All scenarios I don’t want, and that’s why I recognize the importance of life insurance, in addition to my savings and investments, as a safety net.

Then make the process of getting life insurance simple

Note that the reality is that life may be challenging and unexpected events can occur, but it’s best to have a plan in place. Obtaining life insurance should be a crucial part of your strategy and doesn’t have to be a difficult procedure.

Choosing between whole life insurance with a cash value and term insurance would be a good place to start. If you choose term life insurance, do your research to get the best policy for your requirements. This also holds true for entire life insurance.

A fast internet search will turn up a number of life insurance providers online, along with reviews that support their claims. You may also set aside some time to speak with your neighborhood insurance company about what you might actually require.

Lastly, know that right before you make a decision, make sure to shop about and compare rates and policies. In the end, you want to feel secure in the knowledge that your loved ones are in good hands. Next, consider any additional insurance policies you might require in addition to life insurance.

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