It is a sad fact that sooner or later all of us will pass away. It is however because of this fact that life insurance should be an extremely important part of our lives. In many cases this doesn’t exactly always happen.
To a lot of people term life insurance isn’t something that is well thought out, many of us merely associate it with something that covers the cost of funeral expenses. Although this is true to a certain extent, there is a lot more to it than just that; in reality life insurance is something that should be taken out to replace the lost income of a loved one who is no longer around; it is because of this that it has become an important part of your financial planning.
Life insurance becomes incorporated into your financial planning if you have people who depend on you and if your death will create an economic loss for your family, business or estate. It ensures that your family is protected even when you are not here to ensure it yourself. It is the start of a process that ensures your loved ones have financial security and stability. So just what is involved in financial planning?
By sorting out and planning your finances you are giving direction and meaning to the decisions that are made about your financial situation. Also if you view each financial decision you make as part of a whole, you are able to consider its short and long-term effects on your life goals. This means you can also adapt more easily to life changes and feel more secure that your goals are on track.
Financial planning is all about making sure that you are secure when it comes to your money and your expenses; life insurance within financial planning is very similar, the only difference being it is making sure that your loved ones are secure when it comes to money and expenses. This is done through the death benefit that is paid out in the event of your death.
There are a number of financial needs that your life insurance payout will cover in order to help you when it comes to your financial planning; the most obvious of these is final expenses, which includes the cost of your illness and funeral expenses. Other expenses that it will cover include the following:
* Lost income – there will be a gap in the amount of money that will be going into the household. By taking out life insurance as part of your financial planning you will have an income that fills this gap.
* Any outstanding debt – credit cards, auto finance and home loans etc; all of these expenses would be taken care of.
* Education expenses – money may be needed to continue paying for a child’s education, which is an example of something that would have been covered by income.
* Housing expenses – your loved ones will need financial security so they can keep up with mortgages and rent re-payments.
Term life insurance rates and financial planning are examples of aspects that need to be taken care of as soon as possible. The sooner you take out your life insurance policy the more money you will have paid into it and the better off your loved ones will be when the time comes that they have to rely on your financial planning.