Purchasing life insurance is a smart financial decision, but it’s also an emotional one. It’s a tough topic to think about, but you know it’s important to take steps now to ensure your family’s financial future is protected should the unexpected happen. The most common types are permanent and term life insurance.
Permanent policies typically have two components: cash value accumulation and death benefit. A permanent policy is designed to be kept for a lifetime. With permanent life insurance you may pay slightly higher premiums compared to a term policy but you’re earning cash value with your premium dollars and you have coverage for life.
A term life insurance policy provides a predetermined sum (also called a death benefit) if you, as the insured, die during a specified period. Because term insurance is designed to be kept for a shorter amount of time it’s one of the most affordable life insurance options. However, unlike permanent policies, there is no cash value, but you may have the option to convert your term policy to a permanent policy in the future.
how can life insurance protect your family?
Provide financial well-being
If your family depends on your income to pay for necessities like monthly bills and day-to-day expenses, life insurance can help replace the loss of your income. The death benefit can also be used to pay off debts like a mortgage, car loans and credit cards – taking some of the financial stress away. If you have kids, it gives your loved ones more flexibility to stay home or spend more time with them.
Pay for a child’s college
Your policy’s death benefit can be used for many things including paying for a child’s college education. Additionally, with a policy that accumulates a cash value such as permanent life insurance, you can generally access the cash value through a policy loan or withdrawal while you’re still living.
Keep the business in the family
If you own a business like a farm, planning for the future includes developing and updating your succession plan to help ensure your legacy passes successfully to the next generation. Certain taxes may apply when passing a family business to the next generation. Life insurance can help cover those costs, easing the tax burden on the future business or farm owner and other family members.
Leave a charitable legacy
Do you have a favorite charity? Life insurance can be a great tool for increasing charitable giving in your community. You have the opportunity to make a larger gift than might otherwise be possible by designating your go-to charity as a beneficiary on your life insurance policy.
Supplement retirement income
If you purchase permanent life insurance, you’ll generally have access to your policy’s cash value through a policy loan or withdrawal for emergencies, retirement income and more. Some types of life insurance such as permanent life insurance build a cash value over time that can be used as a form of supplemental income in retirement. You have the flexibility to access your accumulated cash without the restrictions that other investments may carry.
Support your needs
There is a common misconception that life insurance is only useful after a person has passed away. But some policies have optional benefits that can help pay for chronic or terminal illness care expenses.
A daily living rider can be a huge advantage when dealing with a scenario such as a chronic illness. If you become unable to perform necessary daily activities such as dressing or bathing, with the rider you can have accelerated access to your policy’s death benefit, and the remainder going to your beneficiary when you pass away. While this rider can help protect you financially in your later years, it is not a substitute for long-term care or disability income insurance. Generally, the rider would need to be purchased at policy issue.
Life insurance is an important element of your overall financial well-being. Expenses for your family can add up quickly from paying for a funeral, staying on top of the mortgage payment and keeping up with the daily cost of living. With life insurance you gain peace of mind knowing your family will be protected.
With so many options available, choosing the right insurance policy can be confusing. As you examine your options, be sure to consult with a trusted Rural Mutual agent to customize coverage to fit your unique needs.
*Life insurance and annuity products offered through Farm Bureau Life Insurance Company. See your Rural Mutual agent for more info about these products.
