Does your life insurance policy cover the cost of living?
The one thing that is guaranteed in life is death. It seems morbid, but it is the truth and, in many ways, that fact gives our life purpose. We love, protect, and work hard to provide for the people we love deeply because we know that one day our time here will end.
Death is unavoidable, so one way people commonly choose to protect their family after they die is by purchasing life insurance before their expiration date. Ideally, your life insurance should be enough to replace what you contributed to your household while living.
When inquiring for term life insurance quotes, it is vital to remember that the goal of life insurance is to replace your financial contribution after you have passed. Depending on your policy, it may not cover what you were contributing to your family’s household.
In states like California, the cost of living is exceptionally high, so it is crucial to be sure your insurance policy leaves your family with enough money.
What is life insurance?
Though senior citizens can find various lists of services for seniors and their families in San Diego, some may still be confused about the concept of life insurance. A life insurance policy is a legally binding agreement between a person and an insurance company.
That legally binding agreement notates the amount of money a person’s family will receive after dying if they make monthly premium payments until the time of death. The insurance company provides a lump-sum payment, referred to as a death benefit, to anyone you listed as a beneficiary.
The amount of money you choose to be paid out to your loved ones depends on your family’s needs and lifestyle. And what your family needs will greatly depend on a variety of factors like the cost of living or how many members are in your family.
How does life insurance work?
The point of life insurance is to replace your financial contribution to your household after you die. The main benefit of buying a life insurance policy is to provide the financial support your loved ones will need when you die. In exchange for a pay-out to your family after your death, you make monthly payments while you are alive to your insurance provider.
Upon your death, your family should not even have to stress about paying for your funeral or any other accommodations needed because life insurance can cover the costs. After funeral arrangements have been made and paid for, the insurance provider will then disperse the remaining funds to the beneficiaries.
So if you were to accidentally die while partaking in the most popular water activities in San Diego, your family could find some comfort with the ordeal because they will not have to stress about losing household income. Instead, they can grieve you passing away in peace.
Who needs life insurance?
Anyone can benefit from having a life insurance policy, but those who are married and/or have children should most definitely purchase life insurance. When your family relies on you for financial support, your life insurance can cover household expenses after you pass away.
Even if you do not have active income streaming into the household, a life insurance payout can help cover child-care or senior-care assistance if you were the caretaker in your family. During the COVID-19 pandemic, finding safe and affordable childcare in San Diego can be difficult, so in situations like this, life insurance is vital.
Also, if you co-signed any loan or credit card with someone else, they can be stuck with the balance, and life insurance can provide them with the extra funds to deal with the money owed.
For those who are single, purchasing life insurance can help you to prepare for a future family because life can change unexpectedly at any time. If you are sure about not growing a family, a life insurance policy can merely be used to cover the cost of your funeral.
Additionally, buying a life insurance policy while you are younger and healthier is a great way to get lower rates.
How much life insurance do you need?
When buying life insurance, people should aim to purchase enough to pay for end-of-life costs (funeral, cremation, burial, etc.), their family’s future household expenses, and any remaining debts. Not buying or not having enough life insurance could lead to your family struggling financially and being liable for your debts or being unable to maintain their lifestyle after you pass away.
An easy way to calculate the amount of coverage you need in your life insurance policy is by adding up your liabilities (debts, bills, etc.) and subtract your assets from that amount. This will provide you with an estimate of your family’s future household expenses after you die.
The majority of life insurance providers recommend that their clients purchase six to ten times the amount of their annual salary. Though this is an excellent way to find a reasonable amount of life insurance coverage, using your debts and household expenses as a margin is just as beneficial.
What kind of life insurance should I purchase?
The two different forms of life insurance are term life insurance and permanent (or whole) life insurance. Term life insurance offers primary coverage for a certain amount of time. That coverage can last anywhere from 10 to 30 years, depending on your policy. In contrast, permanent life insurance lasts the entirety of your life and usually comes with an option to build monetary value.
Term Life Insurance
Term life insurance is the most affordable type of life insurance because it is the most simple. You make payments for a predetermined number of years. After the policy expires, you stop making payments and will have to start a new policy.
Permanent (Whole) Life Insurance
Permanent life insurance is more expensive but does not expire. This type of insurance is costly, but it typically comes with a cash value that earns interest and increases the value when you pay your premiums. The cash benefit can increase the death benefit your family receives after you die, or can be pulled out for use while you are still alive.
Most people choose to buy term life insurance because it is affordable, and they can invest their money in traditional ways to receive a higher cash value. Though, deciding between the two options depends solely on each person’s individual needs and financial situation.
Life insurance can benefit almost every single person. If you have a family, it is crucial that you plan ahead and make the necessary preparations so that your life insurance payout will be enough to cover the cost of living after you pass away.
Imani Francies writes and researches for the life insurance comparison site, QuickQuote.com. She earned a Bachelor of Arts in Film and Media and specializes in various forms of media marketing.