Let's face it, life insurance isn't something we want to think about it. As topics go, life insurance is perhaps the most unsexy subject of conversation. Perhaps it's because of all the math involved, or maybe it's because it forces us to think about our own mortality.
Although it's not a particularly appealing topic, life insurance is something that you and your family need to think about, discuss and purchase.
The truth is that we live in a world of increasing economic uncertainty. Investments formerly viewed as rock solid, such as 401 K programs and even the federally backed Social Security program, are looking a little wobbly these days. Businesses tagged as "too big to fail" are doing just that on a regular basis. All the things we used to be able to count on as certain, all the things we were told to believe in, are increasingly unstable.
Added to that financial uncertainty is the uncertainty of life itself. Anything can happen. You could live to be 100 or you could perish in a freak accident tomorrow. There are no guarantees.
Because of the many things that can happen, it's important for you to create as many bulwarks against misfortune as possible to protect the security of your family in perpetuity. Life insurance can help you do this.
In the simplest terms, life insurance is a form of insurance that pays out money to your survivors when you die. It's one of the oldest financial products still existent today. Life insurance has its roots in the old communal tradition that if your house burns down, then your neighbors will help build you a new one. This concept was refined into the tontine annuity system in 17th century France by Italian money genius Lorenzo Tonti. Under this system, groups of individuals pooled their money together to create a fund with equal contributions from each member of the group. This money was placed in investments, and at the end of each year any gains from the investments were divided among each surviving member of the group. The last remaining member of the group received all the money.
As time went on, the plans began applying the law of averages to the situation to calculate how much risk each participant posed to the plan. Depending on certain life circumstances, a person either pays more or less into the plan or is refused coverage entirely. The use of mathematics to calculate risk and how much the plan needs to stay solvent and make a profit is known as actuarial science.
Today, life insurance basically exists to protect folks against misfortune by having the losses of some insureds compensated by the contributions of a broad pool of people who are also at risk for the same loss, namely death. Life insurance will give your survivors access to a large sum of cash which they can use to pay the costs of your untimely demise, such as funeral expenses and debt. It can also help your family maintain their lifestyle if you die before your time.
As much as we hate to admit it, death can happen at any time. And the untimely death of the primary breadwinner of a family can have a tremendous negative impact on the future of the surviving members. Who's going to pay off the mortgage? How will the children go to college? What if there are outstanding college or business loans?
Life insurance can answer these questions.
By purchasing and maintaining a quality life insurance policy from a reputable insurer, you can safeguard your family's future by ensuring that if you or your spouse pass away unexpectedly, a source of income will exist to pay off debts, cover final expenses and replace lost income.
Life insurance is especially important for couples with children. According to the U.S. Department of Agriculture, the average cost of raising a child to the age of 17 in a middle class household is about $180,000. The cost of sending a child to a four-year college can run anywhere between $30,000 to $100,000.
And don't forget your mortgage. According to the Department of Housing and Urban Development, the average American's monthly mortgage in 2006 $1,687. If you were to pass away tomorrow, could your family afford this without your income?
Life insurance is a solid investment that can help your family cope with these and other challenges. When purchasing life insurance, you shouldn't feel anxious or apprehensive. Instead, you should be proud that you're doing the right thing to protect your family and their future, no matter what.