What actions have you taken recently to ensure your financial wellness? This might include opening up a savings account, making contributions to retirement, or regularly investing in the stock market. But, there are other ways to take control over your finances as well, and that includes making a plan for life insurance coverage.
Even though roughly three quarters of Americans have some form of life insurance coverage, that doesn’t mean that their coverage is adequate. Overall, it’s estimated that more than 100 million Americans either lack enough coverage for their financial goals or are entirely uninsured. However, taking the time to figure out what your financial goals are can help you find the right coverage amount to support your overall financial wellness.
Quick Links
- What is Financial Wellness?
- The Connection Between Life Insurance and Financial Wellness
- Setting Financial Goals
- Ensure Financial Wellness with Life Insurance and Annuities
What is Financial Wellness?
Financial wellness refers to the overall health and stability of your financial situation. It includes various aspects, such as budgeting, saving, investing, and managing debt effectively. Achieving financial wellness goes beyond merely having a high income, though. It involves making informed and responsible financial decisions that align with your goals and values.
As mentioned, a key component of financial wellness is budgeting, which involves creating a plan for how to allocate income to cover expenses, save for the future, and address any other financial goals.
Establishing an emergency fund is another critical aspect, providing a financial safety net for unexpected expenses and helping to prevent the reliance on high-interest debt in times of need.
So, how can you improve your financial wellness? For one, you can begin by focusing on financial education and literacy. The world of finances, insurance, and budgeting can easily become confusing if you don’t take the time to develop your knowledge.
When you have a solid understanding of financial principles, you are better equipped to make informed decisions, plan for the future, and navigate unexpected challenges when they arise.
The Connection Between Life Insurance and Financial Wellness
If achieving financial wellness is one of your goals, then life insurance can help get you there. While the primary purpose of life insurance is to offer a financial safety net in the event of the policyholder's death, life insurance is also a crucial component of a comprehensive financial wellness strategy, providing you and your family with financial protection and peace of mind.
When connecting the dots between life insurance and financial wellness, you may want to take a moment to think about what might happen if you and your family don’t have any form of life insurance protection or are underinsured. Fortunately, there are many options available when it comes to coverage amounts and what you require from a life insurance policy.
For instance, life insurance products come in various forms, including term life and whole life insurance, also known as permanent life insurance. Term life insurance provides coverage for a specific period of time (usually 10, 20, or 30 year periods), offering a straightforward and cost-effective way to secure financial protection. Whole life insurance, on the other hand, offers lifelong coverage and might include a cash value component that can grow over time, providing additional financial benefits.
When unexpected life events occur, your family might not be prepared for a sudden increase in expenses or the significant financial hardships that may result in the wake of a policyholder’s death. If you were to pass away without adequate life insurance, your family may struggle to meet daily living expenses, including mortgage or rent payments, utilities, and other essential bills. This sudden financial strain can lead to a decline in your family's overall standard of living, making it difficult for them to maintain their current lifestyle and cover basic necessities.
Additionally, the absence of ample life insurance coverage may result in an inability to address outstanding debts and financial obligations. Funeral expenses alone can be substantial, and without proper coverage, your family may be forced to dip into savings or incur debt to cover these costs. In extreme circumstances, any existing loans or outstanding debts left unpaid can become a burden on your surviving family members, potentially leading to foreclosure, repossession of assets, or other severe financial consequences.
Fortunately, the death benefit paid out by a life insurance policy with adequate coverage can be used to cover funeral expenses, outstanding debts, and everyday living expenses, ensuring that your family's financial stability is maintained. And, life insurance can contribute to financial wellness by fostering a sense of financial responsibility and planning. The process of researching and applying for life insurance products encourages families to consider the financial needs of their loved ones and take proactive steps to ensure a stable future.
Setting Financial Goals
Making improvements in your financial health and stability means you’ll need to take some time to figure out what you need from a life insurance policy. To determine how life insurance contributes to your financial wellness, here are a few long-term financial goals to keep in mind.
Debt Repayment
For many, paying off debt is a significant financial goal, and life insurance can help. Outstanding debts, such as mortgages, car loans, or student loans, can become a significant burden in the event of a policyholder's death if not properly managed. In these circumstances, insurance proceeds can be used to settle debts, preventing the financial strain that could arise from ongoing repayment responsibilities.
Some policies, such as participating life insurance policies, pay dividends to the policyholder**. These living benefits can be used in a variety of ways. So, if paying off debt is one of your goals, it might be wise to put a portion of the dividends received toward reducing your debt.
Retirement
You might already have an established financial vehicle for retirement savings, but did you know that life insurance can be a contributing factor as well? Whole life insurance products will provide coverage well into retirement. And, policies that accumulate cash value can be used as supplemental income for any expenses that arise during this time.
Estate Planning
Estate planning is another financial goal that life insurance can support. The death benefit from a life insurance policy can be used to cover estate taxes and other expenses, ensuring that the family's wealth is preserved and passed on to the next generation seamlessly.
Education Planning
Life insurance can also contribute to meeting some more immediate financial goals, such as funding education expenses for children or grandchildren. If you would like to ensure financial security while family members are in school, then it may be appropriate to consider a term life insurance policy that provides coverage during those years.
Medical Expenses
While you might not know what medical emergencies come up later in life, you can be proactive in case you or a loved one takes a turn for the worse. Life insurance, when coupled with certain riders, can serve as a valuable financial resource and help you maintain control over your financial wellness.
Take, for example, the long-term care rider. This rider provides benefits to policyholders who require long-term care due to a chronic illness or disability. The funds can be used to cover expenses related to nursing homes, assisted living, home healthcare, or other long-term care services.
Ensure Financial Wellness with Life Insurance and Annuities
Life insurance policies can be customized to meet specific financial goals and can adapt to changing life circumstances, providing flexibility and peace of mind as individuals navigate different stages of life. And, annuities can provide an additional safety net by acting as a form of income after you retire. When you have either one of these products in place, then you can rest assured knowing you’re making smart decisions regarding your financial wellness.
Improving or maintaining your financial wellness with life insurance and annuities doesn't need to be difficult. If you’re part of the 30% of Americans that need life insurance but don’t have a policy in place yet, then you’re in a perfect place to start.
The independent insurance agents at ELCO Mutual are ready to help you find a coverage amount that meets your needs and financial goals. To get started, reach out to our team today!
**Please note that ELCO Mutual does not guarantee dividends from life insurance policies. We encourage you to reach out to your insurance agent for additional information.
