Real-Life Examples of What Life Insurance MeansWhat is life insurance? Life insurance provides the people you love with the financial support they'll need in the event of your premature death. It's a contract, entered by you and the insurance company, which agrees to pay your beneficiaries a monetary amount if you were to die, provided the premium payments are made and the policy is in good standing. The payout could allow your loved ones to meet their financial responsibilities that were once previously covered by your income. That's just a basic summary of what life insurance is.
In the following examples, we'll discuss the benefits of life insurance and what it means to a variety of individuals and families. You many even discover a situation that's similar to yours.
Mark and Robin: Parents of Two Children with a Single SalaryMark is a computer programmer at a large corporation and Robin is a stay at home mom to Erin (age 6) and Michael (age 4). Mark has a small life insurance policy through his employer. However, after using a life insurance coverage calculator, he determines that the coverage isn't enough to take care of his family's financial needs if he were to die. Therefore, Mark may look to purchase additional coverage that is independent of his employer's plan.
What is life insurance to Mark? It's peace of mind knowing that if he were to unexpectedly die, and consequently, his paychecks were to stop, Robin and their two minor children could have the financial resources to help pay the monthly mortgage, car payments, and other bills at a very difficult time in their lives.
Tom and Laura: High School Teachers with No ChildrenTom and Laura are high school teachers at a local school district. As educators, both have small burial policies through their employer's benefits program. Knowing that if one of them were to die the surviving spouse wouldn't bring in enough income to cover their monthly expenses, both purchase a life insurance policy on each of their lives, should the unthinkable happen. What is life insurance to Tom and Laura? For each other, life insurance is income protection. If one of them were to unexpectedly die, life insurance would help to replace the deceased spouse's income.
Sarah: College Student with Co-signers on her Student Loans
Sarah is finishing up her MBA so she can embark on a lucrative career in marketing. Despite scholarships, grants and financial aid awards, Sarah has taken out a variety of student loans in which her parents are cosigners. Knowing that her parents are responsible for these loans if something were to happen to her, Sarah buys a life insurance policy to cover the balance of her student loans.
What is life insurance to Sarah? It's a way to ensure her parents wouldn't be left with the burden of her student debt, and that she's responsible enough to protect their financial well-being should something happen to her before she is able to repay her loans.
Lynda: Single Mother with a Full-Time JobLynda works full time as a medical assistant at a local physician's office and is a single mother to Joshua, age 10. Lynda understands how important her income is when it comes to providing for her son and to save for his future college education. For this reason, she has a life insurance policy that names her parents as trustees for the benefit of Joshua so if Lynda were to die, her parents could have the financial resources to provide Joshua with what he needs. What is life insurance to Lynda? It's knowing that if something were to ever happen to her, Joshua would be taken care of and could realize his dreams for the future.
Peter and Janice: Parents of Children with a Single Salary
Janice works full time as a sales representative for a large pharmaceutical company. Her husband, Peter, is a part-time student and stay-at-home dad. Because the family depends on Janice's income to meet their monthly obligations, Janice has a life insurance policy to help replace her paycheck in the event of her death. Peter also has a life insurance policy because his contribution to the family is just as vital to their lifestyle and the well-being of their minor children. Both parents realize that just because Peter doesn't receive a paycheck, if he were to die, Janice would struggle to find quality, in-home childcare for her three children, and would most likely have to pay for services that could include housekeeping, cooking, and shopping while she continues to work.
What is life insurance to Peter and Janice? It's security knowing that should one or both die, their children would continue to receive the quality care they need, and maintain the lifestyle they have been accustomed to.
Bill and Lorna: Full-time Caretakers of their Two Grandchildren
Bill and Lorna are the proud grandparents of Keith and Libby. They are also their grandchildren's full-time caretakers ever since the unexpected death of Keith and Libby's parents. Knowing that the children depend on them for financial support, Bill and Lorna each have a life insurance policy that names their living trust as beneficiary. If Bill and Lorna were to die, the death benefit from their life insurance could be paid to the trust for the benefit of their two grandchildren.
What is life insurance to Bill and Lorna? As Keith and Libby's primary caregivers, it is the peace of knowing that in the event of their deaths, they'll be leaving their grandchildren with financial protection.
Marcus and Cindy: Parents of a Special Needs Child
As the parents of a special needs child, Marcus and Cindy know that their son, Greg, will require a lifetime of specialized care. For this reason, they each have a life insurance policy to benefit Greg after they're gone. Marcus and Cindy have established a special needs trust that enables their trustee to use the payout from their life insurance policies to help pay for Greg's ongoing health care costs, and to ensure that his quality of life is maintained after they pass away.
What is life insurance to Marcus and Cindy? More than a death benefit, life insurance could represent a lifetime of security and care for their son, as long as he lives.
These examples are just a small sampling of how people may answer the question, “What is Life Insurance?” We understand that your situation may be very similar, or, it may be vastly different.
Whatever life insurance is to you, we hope you take the next step to learn more about the different types of policies available, and secure the coverage you and the people who depend on you for financial support may need.