These days, most families are two-income households.
That describes 61.9% of U.S. families as of 2017 and 69% of Canadian families as of 2015 - United States Department of Labor.
If that describes your family (and the odds are good), do you have a strategy in place to cover your financial obligations with just one income if either one of you was to unexpectedly disappear?
If either one of you was to unexpectedly pass away, it would be so much devastating; what if one of you was unexpectedly incapacitated, not only one-income would be disappeared, but could have also needed some constant home care?
Wow. That could really aggravate the devastating situation, couldn't it?
It’s not easy to think about what might happen if one income suddenly disappeared. (It might seem like more fun to have a root canal than to think about that.)
But having the right coverage “just in case” is worth considering.
It’ll give you some reassurance and peace-of-mind; let you get back to the fun stuff of your life… like not thinking about having a root canal.
If you’re interested in finding out more about insurance and how it may help with your family’s financial obligations, read on…
Talking about insurance, there are basically two types, terms and permanent
Some Basics about Term Insurance:
Many of life’s financial commitments have a set end date. Mortgages are 15 to 30 years. Kids grow up and (eventually) start providing for themselves. Term life insurance may be a great option since you can choose a coverage length that lines up with the length of your ongoing financial commitments. Ideally, the term of the policy will end around the same time those large financial obligations are paid off. Term policies also may be a good choice because in many cases, they may be the most economical solution for getting the protection a family needs.
As great as term policies can be, here are a couple of things to keep in mind: a term policy won’t help cover financial commitments if you or your spouse simply lose your job. And term policies have a set (level) premium during the length of the initial period. Generally, term policies can be continued after the term expires, but at a much higher rate.
The following are some situations where a Term policy may help.
But Wait, There’s More…
There are term life insurance policies available that can provide other benefits as well, including living benefits that may help keep medical expenses from wreaking havoc on your family’s financial plan if you become critically ill.
One note about the living benefits policies, though: If the critical and chronic illness features are used, the face value of the policy is reduced.
It’s important to consider whether a reduction in the death benefit would be a good alternative to using savings planned for other purposes.
In some cases, policies with built-in living benefits may cost more than a standard term policy but may still cost less than permanent insurance policies!
And because a term policy is in force only during the years when your family needs the most protection, premiums can be lower than for the permanent life insurance.
Term life insurance can provide income protection to help keep your family’s financial situation solid, and help things stay as “normal” as they can be after a loss.
However, term insurance is only designed to be temporary coverage.
Here’s why. The policy might guarantee premiums for 10 years – or as long as 30 years – but after its term has expired, a term policy can become price-prohibitive. For this reason the coverage is, for all practical purposes, considered temporary.
A term life policy only has monetary value when it pays a death benefit in a covered claim.
So, the term insurance is a temporary solution, it provides temporary solution for your family; the term expires, the premium you have put into the policy will be gone.
It’s kind of like renting an apartment vs. buying a home. When you rent, it’s probably going to be temporary, depending on your situation. However when you buy a house, the feeling is more like you’re settling down and you’ll be there for the long-haul. When you rent, you don’t build value. But when you buy, you can build more equity in your home the longer you own it.
If however you are looking for some kind of permanent protection, then it is permanent life insurance.
Permanent life insurance can build a cash value, something a term policy can’t do. Permanent Life Insurance however is Designed to Last a Lifetime.
As its name suggests, permanent life insurance is built to last. It’s a common perception that permanent life insurance and whole life insurance are synonymous, but whole life insurance is just one type of permanent life insurance.
At first glance, a permanent life insurance policy can seem more expensive than a term policy, but you’d have to consider the big picture to be fair in comparing the two options.
Over the course of a full lifetime, permanent life insurance can be less costly – in part – because term policies become expensive if you require coverage after the initial term has expired.
An investment element also helps to build cash value in a permanent life insurance policy, taking pressure off premiums to provide coverage.
If I’ve left you scratching your head over your options, no worries!
Understanding the pros and cons of different types of insurance is important, and choosing which policy is best for you is a uniquely personal experience.
If you still have questions, or concerns, you can always contact me, I will be happy to answer any questions you have; or If you prefer to learn more about how to properly protect yourselves or anybody you love,
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Founder of BuildWealthwithDuo.com
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