Life Insurance Explained For Dummies Explained In Simple Terms

No one likes to pay for insurance, but we all need it because let's face it bad things happen. I want to show you how quickly insurance can be useful. We will discuss life insurance explained for dummies thoroughly, so it will be easy to understand. Hello.

Everyone is welcome to Success Wisdom. In this article, we're going to talk about Life Insurance Explained For Dummies, Explained In Simple Terms. Okay. So if you hop in your car and drive to the store right now, you probably won't get into an accident.

Okay. This is what the numbers tell us. Every day, millions of Americans drive their cars, but the chance that you will get into an accident is less than a fraction of one percent. , Even though you have a very small chance of getting into a car accident, everyone knows it's important to have car insurance because You never want to get into a car accident without insurance. In the same way, you never want to be in a situation where your life is in danger and you don't have life insurance to protect your family. Life insurance. Is there to protect your family financially.

If you die unexpectedly. , You can think of it as a shield against the worst-case scenario. I know this isn't a very fun topic, but it's better to be ready for anything and plan. Ahead. Let's say you and your spouse both make $ 50,000 a year, and you are married with a couple of kids. . You have some savings and some investments, but if either you or your spouse lost your job or your income, your family would have trouble paying the bills.

On the bright side. If you lose your job, you can at least look for a new one and hopefully get one soon. On the other hand, if you were walking down the street and something terrible happened like you fell into a big pothole and died, your family has lost a permanent source of income. , Not to mention that your family would have to pay for your funeral and any debts. You might have, and they might have to take time off and work to deal with your death.

⏩ MORE: Term Vs. Whole Life Insurance (Life Insurance Explained)

Unexpected tragedies are hard enough to deal with emotionally, but if you aren't prepared financially, the problem just got a lot worse. At least your spouse was working in this case, but many American households have only one major breadwinner and if you were to die now, your family would be in an even worse financial situation. By getting life insurance. Now you can make sure that your family won't lose all their money if something like this happens.

Life Insurance Explained For Dummies Explained In Simple Terms

Life insurance is just what it sounds like an insurance for your life. , It's life insurance in case you die. A simple definition. So you’ll have a better understanding of life. Insurance explained for dummies. Your life insurance company will come and give your family a big check for half a million dollars, a million dollars, or whatever you decide. While you are still alive. With life insurance, your family can keep living their lives without having to worry about money after you die. , So you can think of life insurance as a way to protect your family from losing a source of income.

⏩ MORE: How To Sell Life Insurance 

However, not all life insurance is the same which can affect how much you have To pay for your policy. Here at Success. Wisdom we're all about helping. You make smart financial decisions. That means living on less than you make saving up for a rainy day and investing your money to get rich. . I think that everyone should try to build up their investments to the point where they can live off the dividends and interest.

So you don't have to go to work to make money so that you can pay your bills. Your investments will look out for you. When I say this insurance salespeople get mad at me, but once you get to that point, you don't need life insurance, because your investments bring in enough money for you to live.

What is life insurance used for?

You don't need life insurance, because if you died, suddenly your family would just get your investments. . They could live off of your investments or sell them if they needed to. If that's what you want to do with your money, you should choose a life insurance plan with that in mind. , So you can buy life insurance for a set number of years.

So you can buy life insurance for 30 or 40 years and if you die during That time, your family will get a big check. . If you don't Die in the next 30 or 40 years, nothing will go to your family. So term life insurance is kind of like car insurance. In that, you get a check if you get into an accident. If you don't get into a car accident, your insurance company won't send you a check. . You get a check if you die during the term.

If you don't die within the term, your family won't get a check, but remember your financial goal. With term life insurance. Your goal is to build long-term wealth through the investments you make with the policy. . Your goal is not for your family to depend on the money from your life insurance policy to stay alive.

What is the coverage of whole life insurance?

This brings me to the second type of life insurance, which is called ``. Whole life insurance. When you get whole life insurance, Whether you are 35 years old or 105 years old, when you die, your family will get a big check. At first glance, you might wonder why someone wouldn't want whole life insurance if they were guaranteed to get a Check. , Well that guaranteed money comes with a big price tag that you have to pay every month for the rest of your life.

Whole life insurance cost.

There are two reasons why whole life insurance costs So much more than term life, insurance. First, you're asking your life insurance company to invest your money for you. . They aren't like an insurance company that will protect you from the worst-case scenario. You asked them to make sure your family gets a big check when you die, so they have to add this extra cost to your monthly payment.

Second, whole life insurance also includes something called `` cash value,'', which lets you invest your money through your policy. . If you like, this video, don't forget to like and subscribe to the channel. Now let’s continue to talk about life insurance explained for dummies. . So let's say you pay $ 1,000 a month for your whole life insurance plan.

⏩ MORE: Florida General Liability Insurance

Your death benefit will be paid for with some of this money. . When you die, your family will get this money. If you had term life insurance, the amount you would get if you died would be around $ 100. , But to keep things simple, let's say that $ 100 of this $ 1,000 is going toward a death benefit. That means that the other $ 900 is going toward the cash value of that thing. Through your life insurance policy, You're, building up a savings account or investment account, but it's not as easy as you might think so.

What is the advantage of cash value insurance?

This cash value part is like a savings account or investment account that your insurance company holds and manages. Everyone loves this part of whole life insurance because you can grow, invest and save your money without paying taxes on it. , You might think ``. Oh, I'm building equity in the insurance company and assets by paying into this whole life insurance policy,'', but here's the catch for the first three years of your policy. Almost none of the $ 900 you're paying for the cash value will go into your own savings Or investment account. That money goes right to your insurance company and it goes right to the commission of your insurance salesperson.

Then, after a few years, when the cash value starts to grow, consumer reports say it will grow by an average of 1. 5 percent a year. This means that your money isn't really doing anything and using that cash value as collateral isn't very helpful. Either. I mean you could cancel your life insurance and get your cash value money back, but that would defeat the whole point of having life insurance. You could use your life insurance money to get a loan right now. When you use your own money, you have to pay interest to your life insurance company. . You could also just wait until you die, but when you do, the cash value portion doesn't go to your family.

Instead, it goes to a life insurance company. Remember how we talked about the death benefit. That's what you give to your family. That means you were paying $ 900 a month that won't go to your family when you die. So term life insurance is usually a better choice for people who invest their own money. Life insurance gives you the financial security you need for as long as you want. . I mean you can get a term plan for 20, 30, or 40 years, and during that time you still have extra cash because you're not paying all this money to the whole life insurance account.

Is cash value life insurance a good investment

You can invest this extra cash and, if you put it in a low-cost index, fund, you're likely to get a much better return than 1. 5 percent. And you also have full control over your money. . Here's another tip that you know beyond just the Type of life insurance policy that you get. The second major factor that affects how much your life insurance policy is going to cost is how old you are when you get your life insurance policy. , You know the younger.

⏩ MORE: How To Use Whole Life Insurance To GET RICH

You are the cheaper life. Insurance is so it can pay to lock in that cheaper rate, while you're young. Now you have the protection that you need for yourself and your family, and once you build that wealth that you're looking for, then you can stop paying for your life insurance because you don't need it anymore you have wealth.

What is the benefit of a life insurance policy?

In terms of the size of a life insurance policy. You typically want something that's at least 10 to 15 times your annual salary. So if you're making sixty thousand dollars a year, then you typically want a life insurance policy. That's at least six hundred thousand dollars. , So life insurance is the financial instrument that you can use to protect your family against a tragedy. You just want to make sure you're using it the right way and that we're looking after your family's pockets, not your insurance company's pockets. . It's a small price to pay for a big piece of mind.

» Read More: Life insurance & Types