Depending on your age and life circumstances, life savings insurance may not have crossed your mind yet. Many don’t worry or think about this idea until they have a family or a mortgage.
There are a few ways to build up assurances so that you know your loved ones will be taken care of. You could establish and grow a savings account. Or you could take out a life insurance policy. Is one better than the other? Let’s dig into what each of these means and why you might choose each.
The truth is that financial security is concept that worries a lot of people. A 2018 survey reported that 85% of people have some stress about their finances, while a whopping 30% are in constant stress about money. If you fall in this category, life savings insurance can help take some of this worry off your plate.
Life insurance v. Life savings
Perhaps you haven’t really thought about life insurance as necessary yet. When you’re young, life insurance doesn’t seem like something you need right away. It’s an extra cost at a time when you might be focusing on building a career or traveling the world.
As you age and become a little more focused in your work or career, and perhaps have a family, life insurance or life savings insurance starts to become more important. There are a few ways you can begin to build assurances for yourself and your family. Let’s discuss a few of these ways.
Life insurance starts to sound important when your life circumstances begin to change. For example, if you are married, all of a sudden there is someone else to protect in the case that something happens to you. If you married and you then have children, not only is your spouse vulnerable to to financial loss if tragedy strikes, but so are your children. And what happens if tragedy happens not only to you but also to your spouse?
These are difficult situations to consider and to talk about but, as you can see, they are also really important situations to prepare for.
If you opt to purchase a life insurance policy, there are a few different types to choose from:
- Term Life Insurance
- Permanent Life Insurance
- Permanent Life Insurance with Cash Value Insurance
Here is a break down of each type, and reasons why each would make sense for you depending on your current situation.
Term Life Insurance
Term life insurance is a great option for some people. For example, if you don’t have the budget for a plan with an expensive premium, but also doesn’t want to leave your loved ones with unpaid debt or expenses on their behalf, term life insurance could be for you. Like any purchase, there are some pros and some cons of buying a term life insurance policy.
Pros for term life insurance:
- Lower premiums-this is a huge advantage for those who have a smaller monthly budget.
- Peace of mind in having a secure death benefit in the case of your death
- Flexibility: you have the ability to choose the length of your term.This allows you to predict your payment amount over that period of time.
- You can convert to a more permanent plan if you decide it’s a better fit.
Cons for term life insurance:
- Your monthly premium is exclusively used for a death benefit.
- While this gives you peace of mind, it doesn’t provide any accumulated cash value
- This means at the end of your term, you have nothing invested–the policy just expires.
* in order to receive the full benefit of the plan, you’ll need to replace the money you borrow.
Permanent Life Insurance
Permanent life insurance is another option when you are figuring out what makes sense. If you want to lock in a premium and not have it affected by age or things you can’t foresee, this could be a better option for you. Keep reading for a breakdown of pros and cons of permanent life insurance.
- Your investment can grow tax-deferred until you withdraw the proceeds.
- Guaranteed coverage for life: you don’t have to worry about the policy ending–you are covered for life.
- Cash-Value: you can borrow against the value of your policy much like a retirement plan similar to having a savings account.
- Higher monthly premiums- if you are working with a smaller monthly budget, this might not be worth it for you.
- Tax implications: if you pass away with an outstanding loan, this money could be surrendered to pay out debts.
Permanent life insurance can be a great choice if it’s affordable for you and if you are living with certain circumstances. For example, if you know you will have family members depending on your past the life of a term policy–usually 60–lifetime coverage may be a better investment for your family. If you are parents of a disabled child, you may consider this–especially if you know you will need to continue to provide for you child into adulthood.
A savings account is another option for accumulation of wealth as you are trying to build a foundation for your family. While a savings account can offer you some peace of mind in that your money is all in one place, most of the time, it doesn’t offer much growth. Let’s look at a few pros and cons of a savings account.
Pros of a savings account
- A place to save money for emergencies.
- Your money may earn small amounts of interest over the years.
- Peace of mind in knowing exactly where your money is.
- Fluidity of your money: you can access your money in a savings account whenever you want with no fees or rules.
Cons of a savings account
- If your savings account earns interest, it’s only a very small amount of additional money
- You can’t grow wealth by any other means than depositing your money
- If something happens to your account, all of your money is affected.
While most savings accounts don’t offer much in the way of interest accumulation, some are better than others. Click here and here to learn about the different types of savings accounts and what might be the best option for you.
One or the Other...or Both?
In the end, you might decide that life insurance is a good fit for your family and your financial situation. Or you might decide that right now, trying to put money aside in a savings account to grow some interest will work best. For some people, having both an insurance policy of some sort and having a savings account, can feel like you have savings insurance. This way, you have money stashed in the case of a financial emergency. But also, you can have peace of mind knowing that if tragedy strikes, your family and loved ones won’t be left in a lurch. It’s a win-win situation. If you’re looking for more information about life savings insurance in Arizona check out other information right here on our website. We are the insurance pros!
Here at IPA, We Care About You
Our business has over 15 years of insurance experience in the State of Arizona. IPA strives to make your insurance experience as smooth as possible. That is why we offer online and in-person options for you. This allows you to choose what is going to be best for you and your situation.
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