Is life insurance necessary? Many people consider it a mush have investment, but in many cases, having a life insurance policy can be useless and a waste of money. The main reason people ignore the facts and go with the wave is because they do not fully comprehend what this type of insurance policy does. They think that a life policy will be in their advantage, which is completely false.
Let's examine the most basic type of life insurance: the traditional policy. This is a type of contract between the insurance company and a person by which the insured is able to obtain death coverage for his or her beneficiaries. Here's how it works: you will pay some monthly premiums, which in the case of a traditional life policy are fixed. As long as you continue to pay the premiums the policy will remain active. If, however you fail to do so, the contract will be canceled. But keep in mind, that you are not the one who receives the money. You are the one who pays for the premiums. So, basically, if you do not have anyone to whom you can leave the money, such an insurance policy becomes useless.
Many argue that it is very good to buy life insurance from an early age, because the policy will build cash value. Yes, this is one of the most important qualities of a traditional life policy: it creates a savings account that grows tax deferred. So, if you sign an insurance policy as early as possible, you will have more money in the savings account the policy creates. But, again, the purpose of a life insurance is not to save you money, but to secure the financial stability of your loved ones, in case you die. Buying a life policy just for the sake of the cash value that it accumulates is nonsense! There are much better ways in which you can invest the money you pay on premiums.
So when should we buy an insurance policy? Like anything out there, it must be bought only if needed. The best time is when you want to start a family. If you have a spouse and you just moved in a new house and are thinking of having a baby, you should start thinking of life insurance also! So do not spend money on insurance policies that you do not really need. Save them for later, when you will have people that really depend on your financial support!
Let's examine the most basic type of life insurance: the traditional policy. This is a type of contract between the insurance company and a person by which the insured is able to obtain death coverage for his or her beneficiaries. Here's how it works: you will pay some monthly premiums, which in the case of a traditional life policy are fixed. As long as you continue to pay the premiums the policy will remain active. If, however you fail to do so, the contract will be canceled. But keep in mind, that you are not the one who receives the money. You are the one who pays for the premiums. So, basically, if you do not have anyone to whom you can leave the money, such an insurance policy becomes useless.
Many argue that it is very good to buy life insurance from an early age, because the policy will build cash value. Yes, this is one of the most important qualities of a traditional life policy: it creates a savings account that grows tax deferred. So, if you sign an insurance policy as early as possible, you will have more money in the savings account the policy creates. But, again, the purpose of a life insurance is not to save you money, but to secure the financial stability of your loved ones, in case you die. Buying a life policy just for the sake of the cash value that it accumulates is nonsense! There are much better ways in which you can invest the money you pay on premiums.
So when should we buy an insurance policy? Like anything out there, it must be bought only if needed. The best time is when you want to start a family. If you have a spouse and you just moved in a new house and are thinking of having a baby, you should start thinking of life insurance also! So do not spend money on insurance policies that you do not really need. Save them for later, when you will have people that really depend on your financial support!
