The pitfalls of being uninsured

Putting off buying life insurance? Learn about the potential mishaps of being uninsured. Photo: Wikipedia

WASHINGTON, December 19, 2013 — Although most people don’t like to think about life insurance, the truth is that it’s difficult - if not impossible - to obtain this type of coverage when it’s too late.

When exactly is it too late? Well, that can mean a number of things - but overall, it refers to leaving those who count on your income or support to fend for themselves if you suddenly were no longer here for them.

Payment of Debt

If something were to happen to you today, how much debt would you leave behind? Do you have a mortgage? A car payment? What about student loan balances, credit card debt, and/or any business or personal loans that you’ve been working to pay down over the past several years?

Think about it for a moment. Without your income, just how much of a gap would there be between what is owed and what would be coming in without your income each month? If the number is big - or for that matter, if there’s even a number at all - it’s probable that you need to cover that gap with life insurance.

While many people think that proceeds from life insurance is for the payment of funeral costs - which it certainly can be - these funds can also be used for so much more. Yet, your loved ones can’t utilize any of these benefits if you don’t have coverage.

SEE RELATED: Life insurance for business owners

Replacement of Income

Without life insurance, you could also be leaving your spouse, children, and/or others who are depending on your income out in the cold. If, for instance, the payment of your mortgage or other important assets is dependent upon your income, the loss of those funds could cause a major change - and even the possibility of having to sell that asset at below market value - just to get out from under the monthly payment.

If you are married and have a stay-at-home spouse and small children, loss of your income due to an unexpected passing could mean devastating consequences. The proceeds from a life insurance policy, though, could allow them the income that they need to carry on with everyday expenses such as food and utilities.

Keeping Future Promises

SEE RELATED: Proclaim your own financial Independence Day

Having life insurance can also help you to keep future promises such as funding your child’s college tuition, wedding, or down payment on their first home. Yet, without the policy proceeds, years of saving and investing may still not provide the same amount of guaranteed funds.

Giving Uncle Sam His Share

One of the other big reasons you should consider owning life insurance is for the payment of estate taxes. Many people mistakenly believe that only the wealthy must pay estate tax at death. Unfortunately, that’s often not the case. Without the proper amount of coverage, your loved ones may be forced to come up with the money to pay these taxes from other sources such as savings or investments or the sales of other assets - oftentimes at below market value, particularly now in the still uncertain aftermath of the Great Recession.

Don’t Let It Be Too Late

Once the true value of purchasing life insurance is fully understood, it is important to purchase a policy sooner rather than later. Although this is an easy task to set aside, there are many good reasons to put it near the top of your list.

The premium that is charged for coverage is based in large part on your current age and health status when you apply. It goes without saying that as you get older, the premium tends to increase exponentially. Likewise, the risk of poor health also rises with age.

Even seemingly non-life-threatening ailments such as arthritis and high blood pressure can actually bump your policy expenses upward, as they can have a pronounced effect on overall life expectancy. Remember, you can’t insure the house if the garage is already on fire.

By purchasing a policy early in life, you can lock in coverage, not to mention a lower premium rate for the long term. This way, even if you were to contract a serious health issue somewhere down the road, you and your loved ones would have the peace of mind knowing that important future financial events will be covered by your life insurance proceeds in the event you’re note available to address them yourself.

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Liran Hirshkorn

Liran Hirschkorn is an expert in the insurance industry where he works hand in hand with the best life insurance companies. He has amassed over a decade of experience and welcomes any questions or concerns you might have about term life insurance. 

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