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Having a life insurance policy makes sure that your loved ones receive money after you pass away. Depending on a policy’s value, the insurance may replace your income or pay for funeral and cremation costs.
Most people with life insurance get policies through their employers. While that’s a great benefit for employees, you should consider purchasing a policy independently. In fact, many people choose a strategy, called laddering, that involves purchasing several policies.
The life insurance that you get from work only covers you while you’re an employee. If you stop working at the company, then you will lose your life insurance benefit.
Losing life insurance becomes a significant issue for people who leave work for health reasons. If you develop a condition that forces you to stay at home or in the hospital for long stretches of time, then you could lose your job. The amount of time that you get away from work varies from company to company. Unfortunately, you don’t have many laws to protect you. Your boss could literally fire you while you’re in the hospital.
Owning a life insurance policy outside of your employee benefit guarantees that your family can still access your benefits once you pass away. Assuming that you pay your premiums, the policy is always there to help.
It’s likely that your financial obligations will grow throughout your lifetime. When you’re young, you may not have a spouse, children or mortgage to worry about. As you accumulate more commitments, though, you may find that you want more coverage from life insurance.
Laddering gives you an affordable way to cover your obligations as they evolve.
As a young person with few financial obligations, you may want to purchase a 10-year policy worth $500,000. If you were to die, your family members would have more than enough money to pay your funeral expenses and debts.
When you get married and purchase a house, you suddenly have to think about your financial contributions to the household. Adding a 30-year policy will help ensure that your spouse has enough money to pay for your half of the mortgage for 30 years.
You may also want to purchase another policy when you have children. Since you can expect to support your children, at least to some extent, for 20 to 30 years, you may need to get another 20-year or 30-year policy that will benefit them.
It’s smart to talk to a life insurance expert about laddering your policies in a way that protects your assets and family. You may find that laddering can even help you save money.