It was Daniel DeFoe, best known for his novel, Robinson Crusoe, who wrote in another work, The Political History of the Devil, published in 1726: “Things as certain as death and taxes, can be more firmly believed.” Sixty-three years later, Benjamin Franklin wrote in a similar vein, in a letter to a friend inFrance, “In this world nothing can be said to be certain, except death and taxes.”
What, you may wonder, does this have to do with life insurance? Everything, really, as a well customized term life insurance policy is one of the few truly effective things that will take care of any financial issues associated with your death, and the considerable taxes that may also be due. You can’t avoid death and taxes, but you can mitigate their effects. You need life insurance, and you’ll also love all the many benefits it can bring you and your family.
Life insurance benefit #1
Funeral costs have risen over the years to become a quite considerable, but necessary expense. Without insurance cover in place, the entire funeral costs fall to the family to find. At the time of writing, the average traditional funeral can cost between $8,000 and $10,000, a very significant amount, especially if money is tight. When you add to that the possibility that the person who has died was the main breadwinner, the lack of a life insurance policy can bite hard.
With proper life insurance coverage in place, your family will have peace of mind and no financial worries to think about. They will, of course, have their grief at your loss to concern them, but no insurance policy can cover that adequately. They will, however, be able to grieve naturally, without having to worry about the cost of the funeral, and if you were the main breadwinner for the family, they can be properly looked after financially too when you are gone, all thanks to your life insurance policy.
Life insurance benefit #2
If your house is mortgaged, and you are the main breadwinner, your family would most likely find it very hard to make the monthly mortgage payments if you die. This could result in them losing the family home if things got worse and the bank foreclosed. A well structured life insurance policy could take care of that issue for your family, giving everyone peace of mind and greater security.
Upon the death of the insured person, if that is you, the insurance company will cover all the necessary financial debts. There will be no surprise bills for your family, no wondering how they will find the money with all the worry that can cause. A death in the family is a stressful enough time, and while there are many thing the family will have to pay, estate taxes, funeral costs, etc, your life insurance policy will take care of it all with the minimum of fuss.
Life insurance benefit #3
Your policy doesn’t have to be just for covering things after you die. It can also cover expenses should you have a serious illness – even a terminal illness – or an accident that prevents you from working. Medical expenses piled on top of the loss of earning can amount to a considerable sum, so it’s peace of mind once again to know this can be adequately covered by what can effectively be a kind of health insurance policy.
Life insurance policies can be structured to provide a kind of education plan for your children. It can kick in when your child reaches 18 and enrols in college. All the many expenses associated with a higher education can be met, and should you die unexpectedly while your child is still young, the money already paid into the policy can still be paid out by the life insurance company to be used to help offset education costs.
Compound interest is the secret to how life insurance works. You pay the insurance company a monthly premium, which they then invest over a period of time. The longer the period of time involved, the more the amount of money that can be accumulated, and generally speaking, the cheaper the insurance policy will be for you. The idea is that when you, the insured person, dies, the insurance company pays back to your beneficiaries a portion of the money they have accumulated from you, keeping back some of it for themselves.
The cost of your life insurance policy depends on several things, but generally speaking, the easier it is for the insurance company to perform this service for you, the cheaper it will be for you. The interest rate and the time involved are the two main things that determine how fast and by how much your money grows. The longer you have to pay into your life insurance policy, the better it will be, so you need to start early. This allows compound interest to do its magic much more effectively.
Compound interest takes time to become really effective. It is in the final years of your policy’s maturing that the greatest effects are seen. This is when the large amount of annual interest is added to the principle sum (which after 20 or 30 years of regular payments has become a significant amount) to generate even more interest, and the snowball effect comes into play in a very noticeable and impressive way. Albert Einstein understood all the mysterious factors at play when he said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
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