Life insurance is often viewed as a far-off solution to the gloomier “what-ifs” of later life. Yet, by viewing it this way, American families often miss out on the potential benefits of using insurance as support for their existing financial plans.
When used appropriately, PHP Agency reviews that life insurance can help immensely with covering long-term goals, such as retirement or the costs of college tuition. It can also grant financial freedom to those who would otherwise be left dependent on the deceased’s remaining estate. To better understand these benefits, how life insurance works and how to diversify a portfolio using a new insurance policy is detailed below.
The Basics of Life Insurance
Life insurance is a legally binding contract between an individual client and an insurance company. By signing such a contract, the insured client agrees to pay a monthly sum to the insurer with the understanding that, should they pass away, the insurer will pay out an agreed-upon sum in full to the insured’s remaining family, dependants, or other specified individuals.
These funds can then be used to cover funeral costs, outstanding debts, medical bills, and other living expenses. Many families also use this money to supplement lost income, cover tuition fees, and contribute to a sense of financial security after a loved one has passed.
Building a Stable Financial Plan
Although life insurance should make up a part of all comprehensive financial plans, it’s important to consider long-term goals and objectives before investing in any policy. With these goals in mind, the insured party can then formulate an outline for how they will reach their desired financial future.
This plan should include a budget that accounts for current and expected expenses, as well as an investment strategy to better gauge the amount of financial flexibility or support they may need from a policy. With these factors in mind, they can then make an informed decision about what to choose.
After drafting a comprehensive financial plan, policyholders can also use their insurance to diversify their portfolios. Ideally, they should find the policy that costs as little as possible while also offering the highest amount of coverage. Of course, the exact policy they need will depend on personal financial goals and considerations as well.
For example, if a policyholder intends to supplement their partner’s future retirement savings, they would be better off purchasing a permanent life insurance policy. If they only intend to cover future funeral expenses, however, then a term life insurance policy may be more affordable and come with more flexible terms.
The Bottom Line
Life insurance is more than just a last resort—it’s an important part of a comprehensive financial plan. Not only can it help to provide financial security during difficult times, but it can also help families to reach their long-term goals. Of course, policyholders should carefully draft blueprints of their financial futures and invest in policies that are best suited to their personal needs. Only then can they start to invest wisely.