Picture this: Every day while driving to and from work, you note this huge tree with numerous branches by the roadside. As days go by, you notice that birds fly here to build their nests. In time, little ones are hatched here. This tree provides shelter and refuge to countless birds.
What would happen if the tree was to be cut down? It would definitely be a tragedy to all the birds since they would be forced to seek shelter elsewhere. How do you compare to this tree which has numerous branches?
As a breadwinner, it is your job to provide for your loved ones in terms of food, education, a roof over their heads and even health-wise. If a terminal illness, an accident or death were to occur, would your loved ones become stranded like the numerous birds on the tree? This is where family life insurance comes in as a means of protection and security to those dependent on you.
This article will give insight into what family insurance is, the benefits you will enjoy and types of covers you can take to protect your family.
Contents
Family Life Insurance
Family life insurance is an agreement between the insured and the insurance policy. The insured agrees to pay a specified amount of money in a stated period of time. This money is to be issued to his family on the account of his death or whatever agreement the contract was based on.
Today, different insurance companies have different life insurance calculators and terms in family life insurance policies. Take time while finding a suitable policy for you and read out all the terms before agreeing to it.
There are different family life insurance policies you can choose from. Here are a number of policies you can consider depending on your age, health, sex, and income.
Types Of Family Insurance
- Term life insurance
- Whole life insurance
- Universal life insurance
- Variable universal life insurance
1. Term Life Insurance
Term life insurance offers guarantees payment only if death occurs in a specified period. This policy has no other value except for the death benefit. If the insured dies within the specified time, the beneficiaries receive this cash. The cash can be used in clearing hospital bills, funeral expenses or clearing mortgages or outstanding debts left behind by the insured.
What happens if the policy expires? The insured may decide to terminate the insurance or renew it. Here is an example. John buys a term life insurance at the age of 40 worth $1M, a ten-year term. After the 10 years, John is very much alive. He can choose to renew the policy but now on different terms.
He is 50 years now and his life expectancy is decreasing. The insurance policy will increase his premium. If John developed a terminal illness during his term, the next term may not be insurable in some policies while others may offer re-insurability which is quite expensive.
What if John decides to terminate his policy? The $1M is lost. If he happens to die, his family do not benefit from an expired policy.
You can choose to pay term life insurance on a level term, yearly renewable term or by decreasing term policies. Level term policy covers a specified period with a fixed premium while the yearly renewable term is paid every year and premiums increase as one age.
2. Whole Life Insurance
Are you looking for a cover that will build up your cash value? Look no further. Whole life insurance is the right pick for you.
Just like the name suggests, this policy is for individuals seeking for lifetime coverage for their family. Unlike term life insurance, this policy has added benefits.
Whole life insurance helps you save for the unknown future. In case you need money to buy a new home, pay for your child’s education, or need a boost during retirement, you can access your cash. In addition to this, it is tax-free!
Whole life insurance steps in during difficult times without letting your family know about your struggles. Just like the tree in the illustration, you get to protect your family.
Before choosing this policy, you can ask yourself these simple questions, how much are the premiums? Do they match my needs? If yes, is it convenient for me to choose a cash value policy or a death benefit protection?
The answers to those questions will definitely help you while choosing a suitable cover.
3. Universal Life Insurance
This family life insurance is convenient for people who are not interested in building their cash value but instead concerned about maximizing long term coverage.
If you are worried about your financial state when your kids grow and need to go to college or how to pay your pending mortgage, this cover is suitable for you.
The universal life insurance has two distinct features: It offers protection for the longest term of coverage unlike other policies; it is flexible.
Your income may increase or decrease as time goes by. Universal life insurance helps you manage your cost as you try to maintain your budget. You can make adjustments where you deem fit.
4. Variable universal life insurance
Are you looking to invest and grow your money while the market is strong? Look no further. Variable universal life insurance is ideal for your needs.
This cover offers long term protection while at the same time helping you grow financially. As the market gains value, you can invest your money here.
This option is ideal to risk-takers since the market growth varies with time. There could be profits or losses. If you do mind taking a risk, you can choose other life policies that guarantee cash value without involving risks.
You may ask, how do I benefit from purchasing life insurance? Here is how.
Benefits of Purchasing A Family Life Insurance
- You get peace of mind knowing you have taken measures to protect your family.
- In the case of financial strains, cash value insurance will boost you.
- You get to enjoy tax-free withdrawals.
- It is an excellent plan to supplement your retirement income.
- It helps you grow financially.
Frequently Asked Questions
When is the best time to invest in family life insurance?
The best time is now. Life is unpredictable and the only way to protect your loved ones from worry is by securing a policy as soon as possible.
Which is the best family life insurance policy?
Depending on your needs, there is a suitable cover for you. There are policies that offer a guaranteed death benefit while others are keen on growing your cash value. It is upon you to choose one appropriate for you.
Is purchasing a family life insurance a waste of my money?
If you do not have anyone depending on you, choosing life insurance may feel like a waste of money. However, if you have a spouse and a child (children), taking an insurance policy is definitely worth buying.
