Every family needs several different types of insurance. Some offer protection for the near term, and some for the long term. Both types are important for protecting your family’s financial future. Make sure your family insurance plans are up to date and will cover the costs of unexpected disasters.
Home, Auto, Natural Disasters
We buy insurance for our homes, our cars, boats, and other things. Some types of coverage are required either by the mortgage company or the state. Depending on where you live, you may have special insurance that covers flooding or other natural disasters that ordinary homeowner’s policies do not cover. However, there are many kinds of insurance requiring individual decisions and are not mandated by any entity. The different types of insurance policies can have profound impacts on the future of your family. Mortgage insurance protects the lender against a default and should not be confused with homeowner’s insurance which will allow you to rebuild your home if it is damaged or destroyed. To add more confusion there is a type of life insurance policy called Mortgage protection insurance that is basically a decreasing term insurance policy set to the outstanding balance of your mortgage. So the coverage decreases as you pay down your mortgage. This is usually an expensive form of term insurance and you can probably find a better deal elsewhere. See Mortgage Protection Insurance vs Private Mortgage Insurance? , How Much Car Insurance Do I Need? and Tips for Buying Car Insurance.
Life Insurance
Life insurance pays out money when the covered person dies. Though, perhaps not a joy to think about, it performs a necessary function that will help your family cover your debts and their living expenses while they adjust to your loss. It pays your beneficiary, be it spouse, parent, children, a charity or some combination. There are two basic types of policies, whole life and term life.
Whole life is more expensive upfront than term coverage. The owner of a whole life policy pays the premiums on life insurance for a fixed period. If you have not died by the time the policy is paid out, the coverage remains, and you owe no additional premiums. One reason the premiums are higher is because whole life policies build up “cash-value” in the early years which covers the higher premium in later years.
With term life insurance, there are several different forms. In a “level term” policy the premium remains constant for the term of the insurance. However, at the end of the term the coverage ceases or the premium increases (often drastically). Terms can range up to 30 years however so as long as you are healthy you can probably find a term policy to cover you. There are also term policies that are called “annual renewable term” in which the premium increases every year based on your age but if you can afford the premium you can renew the policy for another year so there is no fixed expiration. See: The Differences Between Term and Whole-Life Insurance
Annuities, IRAs and Other Options
Everyone needs to plan for the future. Life insurance can be part of your portfolio, yet you also need to save money. The 401k plans offered by many companies that match a part of your regular contribution is a good start. There are also several kinds of annuities that are good investment options. These can pay a monthly benefit or accumulate for use as needed. IRAs and Roth IRAs have different advantages. With the traditional IRA, your contributions are not taxed until you withdraw them giving you more money to invest up front. With the Roth IRA, you pay taxes up-front on your contributions but the earnings grow tax-free. See: Annuities for Retirement and Putting a Gleam in Your IRA.
This article has been brought to you by Kitchen Simeson LLP lawyer in Cobourg who specialize in long-term planning. They recommend having a professional draft your will. In a will, the lawyer will include your instructions in the proper terminology regarding the use of insurance settlements, savings and other resources. He can also help with preparing trust funds and setting forth other stipulations you may want.
See Also:
- Planning Your Estate: 6 Things To Remember
- How To Develop Winning Money Management Skills
- Investing on a Fixed Income
- Useful Tips to Get Your Finances On Track
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