Parents take out life insurance for their children’s benefit, or children write their parents in as dependents on their insurance. The assignation is easy when it’s on paper, but taking out a life insurance also means investment — and in this world of spend, spend, spend, it is increasingly difficult to save, save, save, and set money aside for the future. Can we set our money aside for something else besides that life insurance? Does everyone need life insurance, and is it that important?
Again, life insurance (also known as Life Assurance in the United Kingdom) is, put simply, a financial package designed to protect those who depend upon a certain person for monetary support. If that person dies, those who need him or her will need money. Life insurance can cover their needs depending on the policy they choose.
In other words, life insurance is designed to insure a provider and protect the provided.
So, who needs life insurance?
Unless a child is earning enough money to sustain him or herself, then a child does not need life insurance because no one depends on him or her for income. The premium payments, however, are much cheaper when life insurance is taken out for a person at a very early age, so if you have money to spare, then you still have the choice (though unnecessary) to take life insurance out on your child.
If you are starting a family, it would be advisable to take out insurance on yourself. This is because payment rates will be cheaper than when you get older, and this will be advantageous as you build your children’s future early. The payment rates given, however, will still depend on your income, so if you are not yet earning a lot, you may have to buy cheaper insurance packages that take longer to mature.
Life insurance is most needed by an established family. Remember that insurance is for people on who others depend for financial sustenance. If you are at the head of an established family, then you need life insurance now before you get older and the payment rates become harder to meet.
If you are a working couple without children, you may not need life insurance, as neither of you depends on each other for financial support. You may invest in life insurance, however, if you think it would be necessary to cover funeral costs, or if you think that you or your spouse’s source of income is not stable enough, and will require him or her to depend upon you for support in the future.
Young single adults will usually take out life insurance to either pay for their funeral costs should anything untoward happen to them; or if they want to support an elder whom they may help financially. If you are a young single, earning a stable income, and have people depending upon you for support, then take out life insurance on yourself. Otherwise, you can set your money aside for when life insurance will really be a necessity. What you do need to remember, however, is that payment rates will get higher as you grow older, so the insurance might be expensive by the time you decide that you need to get it.
If you are above the age of 60, it may be difficult to find a suitable life insurance package for you, as the risk of you dying is so much greater. This risk is taken into account by insurance underwriters and actuaries, and will play a role in determining the premiums you have to pay. Premiums are inevitably higher, and the accrued cash will not be any greater than the sum of all the premiums you will have to pay.
However, if you have cash on hand, then taking out life insurance on yourself is not a problem. Just remember that an investment in the stock market, a time deposit, or mutual funds will earn you more money for a smaller initial deposit.
There are two main points to remember if you’re thinking about purchasing life insurance: take it only if you have people depending on you for financial support, and if you have the cash on hand to pay the premiums. If you think you do need it, consult with your insurance agent, or with someone who has purchased a life insurance package. After all, you have every right to decide how you want to build your future, whether you have five decades, or five years ahead of you.