Life Insurance & Its Importance Even On A Low Income
Take a few minutes to sit down and make a list of everything you spend your money on in a given month. You don’t have to be terribly specific, but list the bills, entertainment expenditures and other expenses. Is life insurance on that list? If it’s not, maybe it should be. If you can afford to insure your vehicle, certainly you can afford to insure your life. If you are married or have a family that you help support, life insurance is a great way to ensure that they stay protected should you pass away.
Being on a low income is not an excuse for avoiding life insurance and protecting your family. Obviously if there is a choice between eating and paying for insurance; that’s easy. However trying to find a way to incorporate insurance into your budget is important.
The life insurance isn’t an award for your death; it’s simply a means for your family to cover expenses without stress. Mourning the loss of a loved one is hard enough without having to worry about the financial blow-back of the death.
There are two types of life insurance policies: term and whole life. A term insurance policy will cover you for a set amount of time (typically 10, 20 or 30 years.) The idea of a term insurance policy is that it allows you to cover your life until you have enough saved up that your family would be financially stable even if they lost their sole (or main) source of income. Term insurance policies are cheaper than a whole life policy. Many financial experts advise that budget for a whole insurance policy, purchase a term insurance policy and invest the difference. Over time and with interest this can actually build up to a lot of money you can use in an emergency or to live off of in retirement.
A whole life policy covers you until you die or until you reach the age of maturity, usually 99 years old. Whole life policies are more expensive and a relatively unwise investment mostly because they only pay out if you reach 99 years old or die. When the policy matures you either get the face value of the policy or the amount of money you invested, not both. If you do opt for a whole life policy, do not rely solely on this investment. Consider diversifying to additional investments and creating an emergency savings account separate of your life insurance. While many whole life policies let you withdraw from your balance you are required to pay the money back (with interest… on your own money!).
Your life insurance policy will pay out once you die. It does not cover injury or illness. Additionally, some insurance companies have specific restrictions regarding what they cover. You can usually add additional riders, or amendments, to the policy that would cover illness or injury that resulted in the inability to work for an extended amount of time.
It is entirely possible that your company will actually pay for or assist in paying for a life insurance policy. To determine whether this is a possibility for you; check with the human resources officer in your company or review benefit documents received when you were hired.
Life insurance is designed to provide financial assistance should your family lose income due to your death. If you are single or have a significant amount of money saved up, you may not need to purchase life insurance.
Learn about grants and benefits which may reduce your general living costs and possibly provide the margin you need for insurance.