Reasons to Buy Life Insurance
Premature death is not something that we often think about, but sometimes we need to take time to plan for our future including the future of our loved ones.
We all have reasons why we choose to buy life insurance, most of us do so to protect the standard of living of our families. Life insurance helps to provide protection by providing a tax-free lump sum of funds to our beneficiaries.
Reasons to buy life insurance
- Protect Dependents
- Estate Preservation
- Creditor Protection
- Withdrawals, Policy Loans and Leveraging
- Collateral Insurance
- Inter-generational wealth transfer
Life Insurance coverage however is not exclusive to individuals and families, business owners often purchase life insurance for key man insurance and to finance buy-sell agreements.
Most of us take a micro view and seek protection for our current situation but a reason that one could consider life insurance even without any dependants is for future insurability. Remember, when you get a life insurance quote, standard coverage in many cases is only available to you if you’re healthy. If you have health issues you could either be rated or declined coverage completely. So if you do decide to have a family in the future for example, you may be left without coverage.
There are riders that you can add to an insurance contract to allow you to increase your coverage in future years. The rider is an inexpensive way to guarantee that you can be insured for greater amounts in the future.
Increasing cost of Life Insurance
One of the reasons why I talk to people in their 20’s and 30’s about life insurance even if they don’t have dependants is because implementing a permanent at those ages are much less expensive than if you were to wait until you are in your 40’s or 50’s. Premiums are based on your nearest age at the time of application and can get to be quite expensive in the future. Many people can’t afford it later on in their lives and they will either reduce the amount of coverage needed or go without.
Also, keep in mind insurance companies adjust their rates to remain competitive, there are many factors such as inflation, currently we are currently in a low interest rate environment so insurers have to been forced to take a look at their product lineups to remain competitive, and for the most part that means higher premiums for permanent policies and we should continue to see premiums go up. Who knows, but some of the guarantees that we have become used to, as being a part of life insurance contract may also soon change for new contracts as companies continue to adjust their product lineup to remain profitable. Now may be the time to invest in coverage for the long term.
About the Author
Neil Lecky is a Life Insurance Advisor, Group Employee Benefit Specialist and an Investment Funds Advisor with Alliance Financial Group. He is also a Branch Manager and Investment Funds Advisor with Investia Financial Services Inc., a mutual fund dealer.