This is a guest post from John Michael, a third party personal financial advisor for consumers interested in investments and securities.
Most people know that it’s important to set aside some money for a rainy day. Having an emergency fund is a necessary part of a healthy budget because it lets you weather unexpected expenses like repairing an appliance or paying a medical bill. Most financial advisors suggest having a fund of several months worth of expenses set aside for emergencies.
But what about the really big emergencies? In other words, what if some really bad happens? Two or three months of expenses aren’t going to help your spouse, your children or your estate if you die unexpectedly. Even your retirement savings may not cover all of the expenses that pop up. In these situations, life insurance is the best back-up plan.
Photo Credit: Family Walk via Glyn Lowe Photoworks @ Flickr
Life insurance plans vary, but the basic premise is the same: For a monthly premium, your insurer promises to pay your beneficiaries a certain sum of money in the event of your death. The actual policy and benefits vary between plans of course, but like emergency funds, life insurance plans all provide peace of mind – your loved ones will be taken care of when you have passed.
In many ways, a good life insurance plan can be seen as an investment. The premiums that you pay are small in comparison to the benefits that are paid out to your beneficiaries in the event of your death. Some plans even pay benefits in the event of a critical illness. In this sense, you are investing in the future financial security of yourself and your loved ones.
Life insurance also has a lot of practical purposes. In exchange for small monthly premiums, your insurance policy can assist your family after your death by covering unexpected expenses such as funeral costs. As well, many policies provide benefits that pay off assets such as a mortgage in the event of your death, ensuring that your loved ones are not left struggling with hefty bills. Lump sum benefits can help your significant other or your children get their lives back on track without having to worry about money.
As with any insurance plan, the key is to find the policy that works best for your family and financial situation. It’s best to research and compare insurance plans from various insurance sites before signing a contract. With a good policy, you can rest easy knowing that your loved ones will continue to be taken care of financially, even after you are gone.
