“Life insurance is something that you pay to make you poor while you live so you can become rich once you die.” This was a common joke that I used to hear from people. When I was younger, I actually thought that this is true and getting life insurance is just an advance form of a scam.
As the years passed by, I started to learn more about financial literacy and I realized that getting life insurance is no joke. In fact, it is actually a crucial step in your journey towards financial freedom. What is life insurance? Who should get life insurance? Why do you need to get one? What are its benefits? Is it really worth it? What do I need to consider before I get a Life insurance? These are just some questions that I hope I’ll be able to answer in this two-part article.
What is Life Insurance?
Life insurance is a contract between a policy owner and an insurer, where the insurer agrees to pay an insured’s beneficiary a benefit upon the occurrence of the insured individual’s death or other event, covered by the policy(riders) such as when a terminal or critical illness occurs. In return, the policy owner agrees to pay a stipulated amount called premium at regular intervals or in lump sums.
Who should NOT get Life Insurance?
Not everyone needs to get life insurance. I believe that there are 3 main reasons why you shouldn’t get life insurance.
First, if you don’t have family, dependents, friends, or anyone that you care for and you plan to grow old and die all by yourself, I think you really don’t need to get one as it will just be an extra expense for you.
Second, if you are EXTREMELY rich and you are 101% sure that your wealth can sustain the needs of your love ones and their descendants in case you die. Getting a life insurance is actually optional in your part (you may still get one if you don’t want your love ones to spend anything on your funeral or on estate taxes upon your death). What you really need is a tax lawyer, accountant or an estate planner to help you distribute your wealth among your love ones.
Third, if you are EXTREMELY poor and you won’t be able to pay the premium even if you will just afford the cheapest life insurance that is available for you. (Although, I suggest that you work hard and work smart until you are able to increase your income and you can eventually afford to purchase a life insurance.)
If you do not belong to any of the people above, then I believe that Life insurance would definitely play an important role in your life.
The most common persons who would need life insurance are married individuals especially breadwinners. I’m sure that you don’t want to leave your family, in debts or in financial distress in case of your demise. If you don’t have kids yet, but you plan to have one in the future, then you need life insurance because you want to be assured of your child’s future.
If you are a housewife or a househusband, then you would also need life insurance. It is a mistake if you think breadwinners are the only ones who need to get one. Childcare, cleaning cooking, and other household activities are all important tasks that a stay-at-home spouse does for a family. With life insurance, your family can afford to make the choice that best preserves their quality of life.
Single parents are also the ones who would need to have life insurance the most because they are basically the breadwinner, caregiver, cook, maid and many others for their children. With so much responsibility resting on their shoulders, they need to make sure that they have enough life insurance to safeguard their children’s financial future.
If you are single like me. 😛 You might think that single individuals don’t need life insurance but that is really not the case. Some single individuals need to provide financial support to aging parents and having life insurance would be a great help in case of an unforeseen event occurs. A single individual would also need at least enough life insurance to cover the costs of personal debts, medical and funeral bills. Basically, you don’t want to leave a legacy of unpaid expenses to your family.
Also, since you are single, then I suppose that you have less financial obligation compared to married individuals. This means that you have more chances of creating a stable financial foundation. If you’re young, healthy, and have a good family health history, your insurability is at its peak and you’ll be rewarded with the best rates on life insurance.
This is just the first part. If you think that you are one of those who need Life insurance, Then please proceed to the 2nd Part of this series. We’ll discuss the different types of life insurance available to help you decide which one you should avail.
“Life insurance cannot prevent your death, but it prevents your plans from dying with you.”
I hope this article taught you something about how to achieve success.
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