Why life insurance policies are an act of love

Hitting the pages of social media are long, loud and open-source conversations regarding the concept of love languages. Scrollers of all ages and generations are invited to tag themselves as fans of quality-time, physical touch, gift-giving, among others. What we want to know is: does a life insurance policy make the list?

It may not sound like the most romantic of gestures, and certainly few people in this modern culture want to consider the possibility of their death. However, instituting a life insurance policy which will offer some financial security to your loved ones after you’re gone is a practical, pragmatic, and deeply selfless offering an individual can make.

Understandably, there’s a fair amount of red tape surrounding the world of life insurance policies. But if you can bring yourself to cut through it, the results are well worth it to the most important people in your life. 

So let’s talk life insurance: what it is, how to get one, and why it’s one of the greatest acts of love you can perform.

What is a life insurance policy, and how does it work?

Life insurance policies are financial packages which, much like health insurance policies, the holder will pay into on a monthly or annual basis to feed an account that is bestowed upon named beneficiaries following the death of the holder.

When purchasing a life insurance policy, the holder can specify the amount they want the account to contain. The amount within the account will be directly proportionate to the premium which the holder must pay to maintain the policy – larger accounts incur larger premiums, etc. A larger payout often looks better, but it is important to appropriately budget what you pay in premiums each month.

Often policies will come with a certain set of stipulations which qualify payout, and these stipulations may change depending on the company from which you purchase your policy. Talk to your broker extensively before you buy to make sure you and your beneficiaries are doing everything correctly to ensure optimum benefit.

When you’re gone…

We’re all going to die. And whether our death comes suddenly and unexpectedly, or whether we’re given all the time we need to say our goodbyes, our passing will demand the presence and grief of the beloved people in our lives. 

In an ideal world, the bereaved would be given all the time, resources, and support they could ever need to mourn at their own pace without worrying about the outside realm. But life moves on, even following the death of a friend or family member, and money remains an object which we will have to contend with often sooner rather than later. 

And so, a life insurance policy is one great gift we can give after our passing, especially to those who may depend on us for financial structure. Even financially independent beneficiaries can benefit from life insurance and use your contribution to build better generational wealth and financial wellness for themself and their dependents. 

Getting started with a life insurance policy: 6 simple steps

So, how do you go about getting a life insurance policy? How do you know which one to get? Do you even really need one?? Let’s talk about it.

First things first…

A life insurance policy is an investment which you will not directly benefit from. So, consider whether you need one and who will benefit. 

You may need a life insurance policy if:

  • You have family or friends for whom you want to provide following your death.
  • You want to relieve family or friends of the financial burden of your burial and funeral costs, which can be significant.
  • Your estate is not in liquid form and would not provide adequately for inheritors following your death.

You might also choose to name a charitable organization as a beneficiary of a life insurance policy.

How much do you need?

Consider the impact you want to have on the people you leave behind, and what will represent a significant and supportive amount to them. The recommendation is to think your beneficiaries’ continued financial needs in 3 categories: debt, income, and bereavement expenses. You might sit down with your beneficiaries to create a budget and projected needs spreadsheet to calculate the amount to be purchased.

Browse for the right policy.

You don’t need to break the bank on a really good life insurance policy. It’s important to take your time, shop around and compare offerings so you know you’re getting the best bang for your buck. Many reputable life insurance companies will offer competitive prices and you may be able to get a better deal if you’re willing to haggle and compare. But remember that the ultimate goal is a stable financial future for your loved ones, so avoid going too cheap if it means sacrificing quality.

Budget your premiums.

Holders typically have the option to pay their premiums annually, or in monthly installments. Your working budget will help you to determine which of these options you are able to afford, while also feeding other savings accounts, investments, and meeting day-to-day expenses in the meantime. Life insurance is a critical expense but it is also important to make sure you can afford to maintain your policy.

Let your people know!

Once you have your policy in place, get your beneficiaries on board! Accessing a life insurance policy after the death of a holder can represent another swath of bureaucratic ribbons to cut through, but with a little transparency and a lot of co-planning, the ones you leave behind will have an easier time opening your financial gift to them.

What’s next?

Supporting a life insurance policy, a retirement account, an emergency savings nest egg, and all other expenses of daily life starts by taking a good, long look at your finances and making a realistic and practical budget. Understanding your finances is the first step you or anyone can take towards the cultivation of financial wellness, and it’s never too late or too early to get started. A life insurance payout will be an incredible gift to your descendents following your death, and another is building and passing on financial literacy so you and those you leave behind can do the most with the money you have.

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