Some people mistakenly believe that life insurance is a scam. This is due to the fact that the money for premiums is lost if death doesn’t occur during the coverage period (in the case of term insurance), or because many people live to a ripe old age and continue to pay their permanent insurance premiums. Such naysayers compare life insurance protection to gambling, and forgo the protection entirely.
Of course, there is no bet – you will die, but no one knows when. It could be today, tomorrow, or 50 years into the future, but it will happen eventually. Life insurance protects your heirs from the unknowable and helps them through an otherwise difficult time of loss.
Do you have life insurance?
There are many reasons to buy life insurance including replacing your spouse’s income and pay off debts. Click below to find out more.
The face amount, or “death benefit” of an insurance policy (i.e., the amount of proceeds paid to the beneficiary) should be high enough to replace the after-tax income you would have earned had you lived a full life, presuming you can afford the annual premiums for that amount. In other words, the insurance replaces the income you didn’t have the chance to earn by living and working until retirement due to a premature death.
The proper amount of insurance allows your family to continue their lifestyle, even though your income is no longer available. The actual amount that you should purchase depends upon your present and probable future incomes, any special circumstances affecting you or your family, and your existing budget for premiums.