If there’s anything that the COVID-19 pandemic has taught us, it’s that we should be prepared for anything to happen, especially when it comes to our finances. There are many ways to do this, such as building an emergency fund and saving better, but another option is getting life insurance. It is important for us to make sure that the people who are dependent on us are able to carry on with their lives in the event of our passing. Getting insurance will help better protect ourselves and our loved ones financially.
In an episode of FUNDamentals on Plus Network, registered financial planner (US-based global certification) Edric Mendoza answered some important questions about getting insurance. For instance, Mendoza says that breadwinners who are providing an income source for themselves and their families need to get themselves protected and consider getting life insurance. If there are people other than yourself who are dependent on your income, then this is something that you should consider.
There are many different types of insurance that you can get to protect you and your loved ones, and Mendoza says that you should ask yourself about the options that make sense. One type of insurance that breadwinners should consider is term insurance. This is the cheapest insurance product and for a little bit of premium, you are able to get the maximum coverage amount. Getting insurance is about protecting your income source for your family members, and there are many options that you can consider to see what makes sense for you.
Another important question to ask before getting insurance is asking if you have sufficient coverage. Mendoza says that it’s key to determine how much income you bring to the table so that when you pass, you need to make sure that the income you provide will be sustained. The money from the insurance coverage should be able to cover the family’s expenses and needs once they invest it and it generates interest. When it comes to interest amount, Mendoza says that a conservative number would be 4-6%.
To determine if you have enough coverage, you need to determine your total income for the year and divide it by the interest rate, which should give you the total insurance coverage. This will be the amount that your insurance will earn for your family when you pass. However, there are also nuances to add to this equation, such as the expenses that your family will no longer have when you pass or additional income streams from other members of your family.
These nuances will need to be included in the equation to properly determine your insurance coverage and if it is sufficient. What’s important is to find the realistic insurance coverage for you that is more customized to your unique situation. Once you have done that, you can look for the right company that you can trust and get the right insurance agent who can help get the right premium that will suit you and your family’s needs.
Even though there are families with enough resources who don’t need insurance, for many families, life insurance is a way for them to get the bang for their buck and get maximum coverage for a small premium. For breadwinners, Mendoza believes that getting insurance is the responsible thing to do. It will give you peace of mind that if anything happens, your family will be well taken care of and will be well-covered.
In the end, Mendoza says that money and insurance will not give us the true peace that we are looking for, and the true coverage plan only lies with Jesus Christ. Even if we have figured out how to get sufficient life insurance coverage, if we really want to insure our lives and receive guaranteed peace, we need to give our lives to Jesus. He has promised us peace so that even when we pass, we will be with Him forever and have true peace and protection, which is a guarantee that no insurance policy can give.