Author: Jessica Aiato
For the past few months, we have spent so much time with our families due to the global pandemic. COVID-19 has turned our lives around completely without warning. Over 14.5 million people have been affected by this disease and over 600,000 have died. What is going through your mind? Is your family protected? Is your family’s future protected? Your children’s education? When a loved one passes away, the last thing on your mind is money. But a life insurance policy can help families protect their futures and ease financial burdens.
A life insurance payout could support your family’s financial security. We can’t predict the future. However, we can help our loved ones by planning for it with a life policy. Here’s what you need to know to get started.
What is life insurance cover?
Life insurance is a plan that pays a lump sum to your family after you die. Most life insurance plans are for a fixed period of time and will pay out only if you die during that time period, or term policy. Whole-life cover is more of an investment but will pay out a lump sum whenever you die as well. The good thing about whole-life policies is that you own the policy versus renting the coverage like in a term policy.
Why should I get life insurance coverage? Life insurance will help protect your family financially after you die, in several ways:
Paying for funeral costs
In Bermuda, the funeral can cost $5,000 to $25,000 depending on your choice of send-off. About 60% of Bermudians do not have a plan or funds to cover their funerals. With a Life Policy, your family doesn’t have to worry about the financial burdens that will be on them in the event of your passing. Thousands of families haven’t expected their loved ones to die through COVID-19. Many have been cremated because their families didn’t the funds to bury them like they wanted to.
Your income not only pays for day-to- day expenses but also provides a source for future costs, such as education expenses and retirement. A term-life policy of 20 years or longer can take care of immediate cash needs as well as provide income for your survivor’s future needs. Another alternative is a cash-value life insurance policy, such as whole-life policy. The cash-value accumulation of these policies can be used to fund future income needs for college or retirement, even while you are still alive.
Many folks believe in putting aside money in their bank account. Why not invest it in a life policy that is worth more? Placing $200 into a whole-life policy will be worth more to your family in the event of death than in a bank account. Think of it like this, if you were to deposit $200 in your bank account once a month for a year, your family will receive $2400, which does not even cover your funeral. With a life policy, $2400 yearly premium will give your family around $100,000 if you are 35-year-old female. Now, this will cover your funeral, other expenses after death, and may replace a few months of income.
Paying off debt
For most people, the home is one of the most valuable assets and the largest source of debt. An untimely death may remove a primary source of income used to pay the mortgage, leaving the family nothing left to live on. A term policy can replace the lost income by providing life insurance for the length of the mortgage and longer. If you die before the mortgage is paid off, the term policy gives your beneficiary an amount sufficient to pay off the out- standing mortgage balance owed.
What about mortgage protection? What is the difference? Mortgage protection and term policy are almost the same, except mortgage protection decreases with the balance owed and term policy is a fixed face value for the years of coverage. Term policy is highly recommended for paying off mortgages as the policy is owned by you and not the bank.
Granting a peace of mind
The question that is asked every day is, how long would your dependents need support if you were to die tomorrow? What will happen to your dependents if you don’t have a plan in place? The most important part of keeping those promises is making sure your loved ones would be okay financially if something was to happen to you. Taking five minutes out of your busy schedule will save your family’s future even after you pass.
For more information and a free consultation, please contact Jessica Maiato at Freisenbruch Meyer at 294-4618. BPM