No one expects to find themselves in the middle of a car accident, but each ride on the road is unpredictable. If you’re debating getting an auto policy below are a few reasons why you should consider car insurance. 

SAVINGS TIP! Save up to 40% on auto insurance* by signing up for Driver Score, a program that measures your safe driving habits. Download the MoneyLion app to get started.

 *Actual discounts and insurer participation vary by state. Any potential offers are based on your driving behavior and are at the issuers’ discretion and subject to their review. Not all drivers will qualify for a discount. Potential savings listed are based on the program goals.

1. Legal jeopardy

Every U.S. state except New Hampshire and Virginia requires car insurance. The consequences for going without vary by state but are always unfavorable. You can lose your license, have to pay thousands of dollars in fines, lose your car to impoundment, or face jail time. 

Paying for car insurance allows you to evade these penalties and reap additional benefits. People who find themselves wondering, “Why do you need car insurance?” may find these repercussions present a strong argument.

2. Car insurance provides a financial safety net 

If you drive without car insurance and get into an auto accident, you must compensate the other driver financially. Not only are you responsible for vehicle property damage and losses like lost wages, but you could also be responsible for medical bills. These out-of-pocket expenses add up in a hurry. 

When you submit a claim with your car insurance, you generally have to pay an “out of pocket” deductible before your insurance covers the rest. The insurance payout provides a financial safety net for significant costs. 

The average These surprising and unexpected out-of-pocket expenses can bankrupt some people, but with car insurance, you’ll have a financial safety net to help cover them.

3. Hit-and-run coverage

Traffic safety is an ongoing concern, and fatal hit-and-runs have been rising in the decade from 2012 to 2021. If the driver doesn’t stick around to exchange insurance information, the bill falls to you. Car insurance policies may provide hit-and-run coverage that could help cover medical bills or repairs. 

Without car insurance, you may be stuck with hospital bills and vehicle damage.  Personal injury protection and coverage of property damage will help keep you protected. This conundrum leads to another obvious answer to the common question, “Why do you need car insurance?”

4. Car theft is covered

The National Insurance Crime Bureau says over one million cars were stolen in 2022, a 7% increase from the year before and the first time to reach that level for over a decade. 

The out-of-pocket expenses for replacing a stolen car put a considerable financial strain on most people. Comprehensive car insurance coverage replaces a stolen car. 

5. Car insurance steps in even if you’re at fault

If an accident is entirely your fault, car insurance still covers the payments. While you may pay a little extra in car insurance premiums after the accident, that rate hike is probably much easier to swallow than what you’d pay out-of-pocket expenses for repairs and other damages. 

6. Preserve your credit score

If you don’t pay your car insurance premiums on time, outstanding debt could eventually be sent to a collections agency. To avoid affecting your credit score, you’ll want to pay your car insurance bills. Maintaining a high credit score creates more financial opportunities like lower interest rates on loans, giving you more freedom and flexibility in your large purchases. 

PRO TIP! A good credit score can lead to lower interest rates and increased borrowing power on loans and credit cards. MoneyLion offers a free and convenient way to find offers from our trusted partners to help you improve your credit.

7. Car insurance gets cheaper as you get older 

The great thing about car insurance is that it becomes more affordable as you get older. Younger drivers are at greater risk of getting involved in an accident, so their premiums are typically higher. As drivers get older, that risk should decrease, and payments eventually go down. 

In addition, car insurance companies often reward customers who practice safe driving. Your monthly payments could dwindle as you continue staying safe on the road. The longer you’ve been practicing safe driving habits, the better your insurance rate could be if this service is offered.

8. Protect your assets 

Regardless of your car’s age and mileage, it has value. Whether you trade it into a dealer or resell it, a car is an asset worth protecting. If you owe extensive amounts because of an accident, you may need help. Instead of having to sell off other assets, insurance can help foot the bill.

Car insurance provides various levels of coverage designed to shield you from massive losses and out-of-pocket expenses. Protecting your current vehicle from additional expenses will make it easier to save for the future.

9. Protect the passengers

Not only does car insurance protect you, but it usually protects passengers. As a passenger involved in a car accident, you can file a claim to the insurer of the at-fault driver. Document your lost wages and medical expenses and send them in as part of your claim.

10. Protection from natural disasters

Hurricanes, forest fires, and landslides can destroy your car. These unpredictable natural phenomena can make a big dent in your wallet if you have to pay for replacements with your own money. Car insurance allows you to help evade these out-of-pocket expenses if a natural disaster damages your car. 

The number of billion-dollar natural disasters is on the rise, and you don’t want to get caught by surprise. In 2020, for instance, twenty-two individual climate disasters in the United States each caused more than $1 billion in damages.

11. Roadside assistance

Some car insurance policies offer roadside assistance, providing services such as towing, tire changes, or jump-starts in the event of a breakdown or mechanical failure. There are also some companies that offer solely roadside assistance, entirely separate from your overall auto policy.

12. Cover damage caused by uninsured or underinsured drivers

Although car insurance is required in most states, some drivers choose not to purchase coverage. You can choose for your own insurance policy to include uninsured motorist coverage. That helps you out with damages caused by uninsured or underinsured drivers, ensuring that you are financially protected even if the responsible party lacks sufficient insurance coverage.

13. Cover car rental expenses in case of accidents or repairs

Rental car agencies offer their own insurance policies, but if you have your own car insurance then you might not need it. 

Car insurance can provide coverage for rental vehicles, allowing you to rent a car without paying out-of-pocket so you can continue with your daily activities while your own vehicle is being repaired or replaced.

Why Do You Need Car Insurance, and What Level of Coverage is Best?

Car insurance helps you to avoid costly out-of-pocket expenses. While no one ever expects to end up in a car accident, you never know when you could find yourself in the middle of one. It’s safer and smarter to hope for the best while still preparing for the worst, and car insurance lets you do just that. Without it, you leave yourself exposed to significant out-of-pocket expenses.

Although your auto policy is a necessary expense to help keep yourself and others safe, it’s also a hefty expense that can be a financial strain for some people. The good news is, you can trim it down. Whether you are a high-risk or low-risk driver, find the best insurance tailored to your individual circumstances and needs.

FAQ

If you find yourself looking to find your forever home, you might think that you need perfect credit to qualify for a mortgage. That couldn’t be further from the truth. So, what credit score do you need to buy a house? The required credit score for a mortgage is largely dependent on the type of mortgage you’re applying for. 

Keep reading to find out credit score requirements for each type of loan and how to prepare your credit score and finances for homeownership. 

Do you need good credit to buy a home?

The term “good” in regards to credit score is subjective depending on which credit scoring models the mortgage lender uses and this number can vary. Each situation is looked at individually but it is possible to buy a home with a subpar credit score or a past bankruptcy.  

Below are the types of loans you can get based on different credit score ranges, from lowest to highest. Keep in mind, these credit score ranges can change based on lenders.

Credit Score: 500-580

FHA Loan

These types of loans are backed by the Federal Housing Administration and could be a good fit for someone who has poor credit and doesn’t have much towards a down payment. Albeit, you’ll be required to pay monthly mortgage insurance. Typically, someone with a 500 credit score would be required to put down 10%. While someone with a 580 credit score might only be required to put down 3.5%.

Credit Score: 580-660

VA Loan

Government-backed VA loans are insured by The U.S. Department of Veterans Affairs. These types of loans do not require a specific credit score, but private VA loan lenders typically have a minimum of between 580-660 credit score. 

Additionally, either you or your spouse must meet the basic Department of Veteran Service Affairs (VA) requirements including a valid Certificate of Eligibility (COE) and lender credit and income requirements. Also, at least one of the following service history and duties:

• Served 90 consecutive days of active service during wartime
• Served 181 days of active service during peacetime
• 6 years of service in the National Guard or Reserves
• Spouse of a veteran service member who has died in the line of duty, missing in action, or being held as a prisoner of war. 

Visit VA.gov to find out more

Credit Score: 620+

Conventional Loan

Different loans can fall into the conventional loan category, such as jumbo loans, but generally, these loans have stricter qualifying terms than FHA loans. However, conventional loans are not guaranteed or insured by the federal government. Every lender has their own credit score criteria but some lenders will allow a score of 620 and a debt-to-income ratio of 50% or less to qualify for a conventional loan.  

Credit Score: 640+

USDA Loan

The U.S. Department of Agriculture backs USDA loans and lenders can offer lower interest rates compared to conventional because of their government backing. These loans are known for making rural home-buying more affordable with little to no down payment, competitive interest rates, and low monthly payments. Lenders may have their own set of guidelines, in addition to the USDA’s Rural Development Program requirements below:

• U.S. citizen or legal permanent resident
• Creditworthiness (repayment history, credit utilization, length of credit history)
• At least 640 credit score
• Stable income
• Credit history of at least 12 months of no late payments or collections
• Household income equal to or less than 115% of the area median income
• Property is the primary residence 
• Located in qualified rural areas

Will I save money on my mortgage if I have a better credit score?

Yes, having a higher score can get you better interest rates, terms and possibly reduce the down payment amount. However, as we’ve explained you can still qualify for a mortgage under the right circumstances with a low credit score.  

How can I renew my score to get a better mortgage rate?

If home buying is on the horizon, a Credit Builder Loan from MoneyLion can help get your credit score in tip-top shape. Over the course of 12 months we’ll report your payments to all three credit bureaus and potentially enrich your credit up to 60 points in 60 days! 

Keep close tabs on your credit progress in our mobile app and have access to 0% APR cash advances at your fingertips–just in case!  Here are some other must-do tips to enhance your credit score:

• Create a budget: Not sure where you’re spending your money? Skip the old school budget sheets and sign up for a MoneyLion RoarMoney account to track your spending by category. 

• Make on-time payments: Set up auto-pay and due date alerts on your bills to avoid missed payments. After all, a missed payment can knock your credit score down by up to 100 points! 

• Micropayments: Split your monthly payments into micropayments. This decreases interest and gets you ahead of your repayment timeline.

• Track credit progress: As we said before, MoneyLion Credit Builder plus members get 24/7 credit monitoring access alongside tools like the Financial Heartbeat to keep your financial health on point. 

• Authorized user: As a trusted family member or friend to hop on their credit card as an authorized user. PSA: make sure they have excellent credit and always make their payments on time!

• Increase income: Although income doesn’t have a direct impact on credit score, mortgage approval does. The more money you make, the large mortgage you’ll be approved for.   

Prepare Your Credit For Homeownership 

A good rule of thumb is not to spend more than 29% of your gross income on your monthly mortgage payments. So, before you get a mortgage prequalification, sit down and review your finances to determine how much you can afford. This will help you avoid the heartbreak of falling in love with a house that you cannot afford. 

During the home buying, process fees can add up at a moment’s notice and payday stays the same. For last-minute cash needs, consider using Instacash and instantly get up to $250 interest-free!

This post originally appeared on PolicyGenius’ blog. In the market for life insurance? Get you free quote from PolicyGenius today.

You have big plans in life. You want to have a family. You want to own a home. You want to retire while you’re still young enough to enjoy it. Heck, maybe you’re already doing these things, or are at least well on your way.

But all of those plans don’t mean much without life insurance.

If you were to die, would your significant other be able to afford to raise that family, and send your children off to college? Would they be able to pay the mortgage on that home? Would he or she be able to retire if there’s no second income fueling a 401(k) or IRA?

It can be scary to think about, but it doesn’t have to be. If you have the plans, you need to shop for life insurance. And that can be scary on its own. But for first-time life insurance shoppers, you can be confident in your ability to buy life insurance by asking these five simple questions.

Do you need life insurance coverage?

Here’s a surprising answer: Maybe not.

Are you young and healthy? Are you debt-free? Are you free of any dependents who rely on your income?

If the answer is “Yes,” then you may not need life insurance. Life insurance acts to protect your dependents in the event that the worst happens. If you don’t have anyone sharing debt with you, or anyone relying on your income, then you may choose to not purchase life insurance. It can still be helpful to buy it now since, as we’ll talk about later, life insurance only gets more expensive the older you get, but it may not be a necessity at the moment.

On the other hand, if you do have people relying on you, and you can’t self-insure with savings, life insurance is a must-have. Any financial plans you have in place, whether it’s making day-to-day expenses, saving for the future, or paying off past (and current) debts, can all be derailed, leaving your dependents behind to pick up the check in a lot of cases.

So take stock of the debts and plans you currently have, what your plan for the future is, and how each affect other people. If there’s someone who would stand to benefit from a lump sum of tax-free money to complete these financial plans, you need to buy life insurance.

What are the basics of life insurance?

There are a lot of [==different types of life insurance==](https://www.policygenius.com/blog/different-types-of-life-insurance-guide/) out there, but if you need straightforward, affordable coverage to complete your financial safety net, the best product for you is likely [==term life insurance==]https://www.policygenius.com/life-insurance/is-life-insurance-worth-it/. It’s simple: You purchase a policy for a certain amount of time, pay a fixed monthly amount, and if you die during that certain amount of time, your family gets money. Other life insurance types get complicated – and expensive – with things like interest-accruing cash value components, but term life insurance is simple.

Let’s dive into some important terms that should be a part of your life insurance lexicon:

• Term – This is how long your life insurance policy lasts (as long as you pay for it each month). The term can be as short as five years and as long as 30 years. First-time life insurance shoppers should determine how long they’ll need protection from the policy in order to protect all of their financial plans.
• Death benefit – The amount of money that’s paid out in the event of your death (if your death occurs during the policy’s term). This generally ranges from $25,000 to $10,000,000. The death benefit is paid out as a lump sum and is tax-free, allowing your dependents to use it as needed.
• Beneficiary – The person (or people) who receive the death benefit. For most people it will be their spouse, but it can also be parents, children, or even pets or institutions like charities or museums. The beneficiary is listed on the life insurance policy but can be updated during the policy term to take into account changes in your life.
• Premium – This is how much you’ll pay for your policy. Typically it is paid monthly, but some life insurers may offer discounts for policyholders who pay annually. The premium charged to you is based on how likely you are to pass over the policy term, as determined during underwriting. Once your life insurance policy is in-force, your premium rate won’t increase (as almost all term life policies are fixed level term policies, meaning the premium is fixed).
• Underwriting – The process by which a life insurance carrier determines how likely you are to die during the term of your policy. Underwriting occurs after you apply and will determine your premiums for your chosen policy. Current health, health history, driving record, hobbies, and more go into the underwriting process, allowing the life insurance carrier to classify you based on how risky you are to insure. A medical exam and a variety of documents are used during underwriting. You can learn more about everything that goes into the underwriting process in our full guide.

How do you know how much coverage you need?

For first-time life insurance shoppers, it can be difficult to figure just how much coverage is enough. Going through our insurance checkup can help, but here’s a quick way to [==figure out how much protection you’ll need==]).

• Figure out how much debt you have. Some debt can be passed on to your loved ones – shared credit card debt, for instance, or some co-signed student loans. Then there are long-term debts like auto loans and mortgages; even if a beneficiary isn’t obligated to pay them, not paying them has real consequences, as they may be paid off from your estate, lessening what your survivors stand to inherit. If you died, would your loved ones be able to cover these debts?
• Figure out how you’ll pay for college. Ten years from now, college may be two to three times the cost of today’s higher education. A 529 savings plan is a great way to afford college, but it doesn’t do much good if you’re the primary breadwinner and you’re no longer around to contribute to it. If you’re not yet able to afford four years of college for each of your children, add that to your costs.
• Figure out how much your dependents need for day-to-day living. When you think of dependents, you’re probably thinking of children. And they can be expensive: in addition to things like clothes and food, will your partner need a nanny or daycare in order to help raise them on his or her own? Also consider aging parents, who may need to be supported in their old age. Every aspect of caring for your dependents – all of your dependents – needs to be taken into account.
• Figure out how they’ll afford end of life expenses. End of life care can be expensive (we’ll get to a way to mitigate that using life insurance in a bit) and funerals can cost north of $10,000. Don’t want to leave your grieving family with a huge bill? Make sure end of life expenses are factored into your financial needs.
• Figure out what your financial cushion is. Or, rather, you should figure out what you want your spouse’s financial cushion to be. We’ve talked about the things that absolutely need to be paid for, but what about funding your partner’s retirement? If they work, how much will they be able to contribute to these expenses, and how much will they rely on the death benefit for? This is a conversation you and your spouse should have with each other so you’re both on the same page.

All of these needs are variable. At one point in time you might be paying your mortgage, saving for your kids’ college, and putting away money for retirement. But down the line your house is paid off, your kids have graduated, and you’re looking forward to your golden years, safety net in place. Should you be paying for the same level of life insurance?

Of course not! That’s why we love term life insurance. Unlike permanent life insurance policies, which are more expensive and stay in place for as long as you pay your premiums, term life insurance ends. By the time it does, you’ll hopefully have fewer obligations that need coverage. Using a little-known secret called the ladder strategy, you can step down your coverage as your needs decrease.

Under the ladder strategy, you buy multiple, smaller policies of varying death benefits and terms. For example: You may start with three policies totalling a million dollars of coverage, and as they expire, you’ll find yourself with a single policy worth $250,000. Using this strategy, you can save as much as 50% on your life insurance costs (compared to the cost of a single large policy) and you won’t find yourself with unnecessary coverage – or premiums – when you’re in your 50s or 60s.

The ladder strategy might be a little more than a first-time life insurance shopper is looking for, but a good agent can walk you through the idea and help you determine if it’s right for your situation.

What affects the price of your life insurance policy?

So, life insurance can last decades and pays out hundreds of thousands – maybe even millions – of dollars. Must be pretty pricey, right?

Usually not. We break down life insurance pricing at different ages here, but in short, life insurance is surprisingly affordable considering the peace of mind you get. Here’s what goes into how much you’ll pay for the policy:

• The term and size of the policy. This one is pretty straightforward: The shorter and smaller your policy, the less you’ll pay. As you increase the term length and the death benefit amount, you can expect your premium to increase.
• Your age. Life insurance gets more expensive as we get older. That’s just a fact of life. Premiums can increase by as much as 8-10% every year you put off buying life insurance. That’s why, even if you’re young and don’t yet have the obligations that typically necessitate life insurance, you might consider buying it now. You can lock in low rates, meaning 55-year-old you will be paying 25-year-old you prices. Plus, you’ll be well-prepared for the future.
• Your health. Between the medical exam, which is essentially a physical so the life insurance carrier can get a picture of your current health, potential requests for Attending Physician Statements, which is your health history from the point of view of your doctor, and looking into your family’s health history, it becomes quickly apparent that life insurance companies are very interested in your health. That should be a clue as to how important your health is to your life insurance premium rates. Smoking, obesity, high cholesterol, diabetes, and more play a role, and if you’re in poor health, it can raise your rates substantially. That’s not to say that you’re out of luck: Some conditions, like HIV/AIDS and cancer, are much more manageable now than they were even just a few years ago, and aren’t viewed as strictly by insurers as they once were. Changing habits, like quitting smoking, and taking proper medication are looked upon favorably by carriers. And many carriers work with consumers with health conditions to get them competitive rates. It might take a little extra legwork, but first-time life insurance shoppers with less-than-perfect health shouldn’t be put off.
• Other factors. This is sort of a miscellaneous grab bag of other things that are considered when determining the cost of your life insurance plan. Remember, your premiums are largely determined by the risk you pose of dying over the term of your policy. While health plays a big role in that, other factors, like your hobbies (do you skydive and scuba dive a lot?) and your driving record (are you likely to get into an auto accident?) also contribute.

What riders are available?

Worried that a standard life insurance policy isn’t for you? Spice it up a little with [==riders==]https://www.policygenius.com/life-insurance/what-is-a-life-insurance-rider/ – essentially mini-contracts that modify your policy so that it suits your needs. Some riders come standard with certain carriers, while others will add a little extra to your premium. You won’t need every rider that’s out there, but you should be aware of some popular ones so you know what your options are.

• Accelerated death benefit – End of life expenses and treatment can get expensive. In the case of terminal illness, you may benefit from an accelerated death benefit rider, which will allow you to access your death benefit and pay medical bills so the task isn’t entirely left to your family when you’ve passed. This rider is typically standard on term life insurance policies.
• Waiver of premium – Long-term disability insurance is a great way keep money flowing in even if you’re disabled (first-time shoppers can find our guide for it here). But if you become disabled and can’t pay your life insurance premiums, a waiver of premium rider will allow you to delay payment for a period of time. This rider is typically an added cost on term life insurance policies.
• Term conversion – We like term life insurance because it gives you protection while you need it, and you can stop paying for it once your financial obligations are finished. But if your life insurance term expires before you’re ready for it to, a term conversion rider will let you transition your term policy to a permanent policy that will last for as long as you pay your premiums. This rider is typically standard on term life insurance policies.

Are these five questions the only thing you need to know about life insurance? Of course not! (We have an entire site full of more information!) But it’s important to take the first step toward getting covered, and knowing the basics will give first-time life insurance shoppers a foundation to dig into the details. Talk to one of our independent licensed experts today to ask any questions you have about life insurance or get your free online quote, and find out how you can get covered as soon as possible.

Colin Lalley writes for PolicyGenius, a digital insurance brokerage trying to make sense of insurance for consumers. He previously wrote for Lulu Press.

Life insurance is an important part of planning for your future. It may seem daunting or overwhelming when you first think about it, but setting up a life insurance policy is an excellent way to take care of your family when you are no longer here.

In fact, did you know you can use your insurance policy for cash value? Let’s learn not only about the different types of life insurance but how you can make them work for your and your future. 

What is life insurance?

Life insurance policies differ based on your needs and where you live. In its simplest terms, life insurance is a policy or agreement between a person and their insurance company dictating where their money goes post-mortem. 

This agreement essentially says that you will pay into a policy over the course of your lifetime. When you pass away, your insurance company will pass your money and benefits on to your dependents or beneficiaries as stated in your will. In the event that you don’t have any dependents or beneficiaries, your insurance policy money will be used to pay for things like funeral costs and repaying any outstanding debt. 

How does life insurance work?

Life insurance works similarly to all other insurance options. You pay into a premium, and once a claim is made, you’ll receive a payout. The difference between life insurance and other forms of insurance is that the payout is given after you, the policyholder, pass away. 

Instead of insuring your own life, life insurance policies exist to provide financial support to your family when you die. The beneficiaries of your life insurance plan will need to file a claim before they can receive a payout, and the waiting period is based on the terms of the policy. Not all insurance policies are alike. 

Why is life insurance important?

It is easy to support your loved ones while you’re alive, but what will happen to them when you’re gone? A life insurance policy helps you set your family up for financial support in the aftermath of your death. 

Setting up a life insurance plan is a fast-moving process that can provide peace of mind to your loved ones. With life insurance, you will be able to pay for costs associated with your name even when you’re no longer here. This takes a lot of weight off your family members’ shoulders because they won’t have to burden the financial costs of your outstanding fiscal responsibilities.

Types of life insurance

There are several types of life insurance policies that you can purchase, the most popular of which being term insurance and whole life insurance. Both forms of life insurance come with their own set of advantages and disadvantages. 

Term life insurance

Term life insurance is one of the most common types of life insurance. Many people even consider term life insurance the simplest form because it only pays if death occurs during the term of the policy. 

Term life policies have a length typically between one to thirty years. There are two types of term life insurance policies: level term and decreasing term. 

1. Level term life insurance: Level term means that the death benefits remain the same throughout the policy. 

2. Decreasing term life insurance: The decreasing term refers to a policy in which the death benefits usually decrease incrementally over the course of the policy. 

Advantages of term life insurance

An advantage of term life insurance is that it’s the most budget-friendly option for life insurance. This type of life insurance is best for those of you who are not able to pay a higher premium but are still ready to start putting money into a policy. Another advantage is that term life insurance can be renewed or converted to a different form of life insurance once you are able to afford more expensive—and therefore more beneficial—insurance policies.. 

Disadvantages of term life insurance

The disadvantage of term life insurance policies is that they typically do not provide cash value as a death benefit. They also only provide coverage for a limited period of time. Also if you outlive your term life insurance policy, you won’t get any of your money back once the policy expires. Instead, all of the money that you poured into your policy over the years will stay with the insurance company. 

Whole life insurance

Whole life insurance is the most common form of permanent life insurance. Permanent life insurance means that the insured person will be covered for the entire duration of their life as long as the premiums are paid. 

It’s sometimes called guaranteed whole life insurance because the policy price remains the same over the life of the policy, and you are guaranteed coverage for your whole life as long as you pay the premiums. Whole life insurance also provides the opportunity to invest because you can turn your policy into cash assets. 

It can be viewed as an investment or a way to start saving for the future. Whole life insurance pays the beneficiary a tax-free death benefit. This is tax-free as long as you are below the federal and local estate exemption levels. Be sure to check that your state does not impose estate or inheritance taxes. 

Advantages of whole life insurance

The advantages of whole life insurance are that you are able to withdraw funds, your premiums are fixed, and cash value accumulates. As long as you make the required premium payments, your death benefits are guaranteed. 

Disadvantages of whole life insurance

There are some disadvantages of whole life insurance that are important to consider. Whole life insurance can be hard to understand. It is recommended that you ask a lot of questions and seek clarification on anything you don’t understand. 

Even though cash value is an advantage of whole life insurance policies, the main disadvantage is that the interest rate could be much lower than the interest rates of other investment options. It is possible that if you’re looking at a whole life plan for creating and growing a family financial management plan, there might be better, more lucrative options than a whole life insurance policy. 

A whole life insurance plan might not be the best option if you are just starting to invest in your retirement. It is more ideal for people who want to diversify their portfolios. 

Keep in mind that whole life insurance tends to be expensive because it offers cash value that can be used as a loan. If this is not something that is important to you, it’s possible another form of life insurance might be better for you. 

Universal life insurance

Universal life insurance offers lifelong coverage. It also offers flexibility when paying premiums and different choices on how to invest the policy’s cash value.

You’ll have the option of variable or indexed universal life insurance depending on how you want to invest in the policy. This policy can grow exponentially according to how you manage the portfolio. 

There are some similarities in both whole life insurance and universal life insurance even though the two policies might sound familiar. The cash value for a universal life insurance policy can be used as loan collateral. This means that you can borrow money from your insurance company and use the value of your plan as collateral. 

Be sure to check the interest rate on the loan. Your interest rate is a value set by the insurance company. The policy also has what is called a surrender value, which explains what happens if you decide that you no longer want the policy. You’ll have the option to surrender or return your policy to the insurance company, and they will give you cash in return. 

Finally, you can use the cash value of your policy to pay either a portion of the payment or the entire premium payment. The policyholder will decide how much you pay. This means that you can pay the maximum premium amount in the beginning to build up your cash value. 

Advantages of universal life insurance

Having cash value is one of the advantages of a universal life insurance plan. Depending on the overall market value, your cash value can increase rapidly. Another advantage of universal life insurance plans is that they come with lifelong coverage. 

As long as you pay your premiums, you have coverage. There is no expiration date. Also, there aren’t any additional health assessments needed. Once you have coverage, you’ll remain covered, even if your health condition changes. 

Disadvantages of universal life insurance

A disadvantage of universal life insurance is the unpredictable variable interest rates. These rates determine the cash value of your policy. Another disadvantage has to do with the importance of keeping your policy active. 

If there is a lapse in your policy, you run the risk of losing your entire cash value. This requires diligence but it also doesn’t account for the possibility that you might not be able to pay your premium. 

Indexed universal life insurance

An indexed universal life insurance policy puts a portion of the policyholders’ premium payments toward annual renewable term insurance, and the remainder is added to the cash value of the policy. 

This type of insurance policy provides coverage as long as the premiums are paid. Indexed universal life insurance policies also offer flexibility and tax-free gains. Indexed universal life insurance includes a death benefit that is paid out at the policyholder’s demise.

Advantages of indexed universal life insurance

One major advantage of an indexed universal policy is the high return potential. You can gain upside exposure with your policy without the risk of losing. This policy also offers a lot of flexibility. 

You can determine how much risk you want to take in the market, change the amount of death benefits, and adjust the policy to better suit your needs. There aren’t any impacts of Social Security benefits when taking advantage of the case value of this policy, too. 

This means that you can take a loan against your policy and not worry that it will impact your Social Security benefits. Of course, there are some disadvantages that you should consider as well. 

Disadvantage of indexed universal life insurance

One of these disadvantages has to do with the fees. There can be a lot of fees associated with an indexed universal policy. 

There is also a cap set on returns. This can limit the actual amount that is credited to your account. It is important to be aware of these caps if you are looking to use your policy to invest. 

An indexed universal life insurance policy can meet the needs of not only an insurance policy but it can also assist with financial investments. It is important to take your time with this policy because it can be very complex. If you are not ready to take the time to understand the ins and outs of this type of policy, it might not be the best for you. 

Variable life insurance

Variable life insurance is a permanent form of life insurance. It is made up of separate accounts comprising various instruments and investment funds. This setup makes variable life insurance policies very risky investments. Due to the risks associated with variable life insurance policies, they are regulated under federal security laws. 

Advantages of variable life insurance

Variable life insurance policies have specific tax benefits, which are very advantageous. One tax benefit of variable life insurance policies is that your policy can be used as a tax-free loan as long as you keep your policy active. 

Another advantage is that the premiums are not fixed. You can adjust your premium payments to meet your needs and goals, all within reason. There is also higher investment earning potential on this policy.

Disadvantages of variable life insurance

These policies tend to be expensive compared to other policies. This can be viewed as one of the disadvantages of this policy especially for people on a budget. The fees can add up quickly, and you may need to increase the frequency of your payments to keep the policy active. 

Another notable disadvantage is that someone who is considered “unfavorable” or of compromised health may not qualify for some of the coverage of variable life insurance policies. Or if you are considered despite these qualities, you might have to deal with higher premiums. Be mindful of this when considering a variable life insurance policy, but know that there are other policy options for you as well. 

If you want cash value, you’re okay with some investment risks, and have the time to understand the complexities of this plan, variable life insurance could be something you want to consider. This insurance policy can be great for investing and future planning, but it can come with very expensive costs.   

Variable universal life insurance

Variable universal life insurance is a policy that has built-in savings components. This savings component allows for the policyholder to invest using the policy for cash value. The policy has sub-accounts which can be like mutual funds. 

This type of account allows for great returns with some risks associated, too. There is a cap and a floor on the returns that you can receive from this plan. Each year, the policyholder will deduct what is needed to cover costs like administrative fees and the death benefit for the beneficiaries of the policy. 

The remaining amount is left in a separate account that earns interest. The separate account—or subaccount—has various stocks,  bond accounts, and money market account options. 

Advantages of variable universal life insurance

A variable universal life insurance policy is a great way to make investments. They have a higher upside potential than other policies. There is also a tax-fee benefit for your beneficiaries. 

This benefit is particular to someone who is already relatively wealthy with assets below a set dollar amount. Another key benefit of a variable universal policy is the cost. In some cases, this policy can be cheaper than other permanent policies because the cash value can become very high. 

Disadvantages of variable universal life insurance

Similar to other permanent policies, there are a lot of fees involved in a variable universal life insurance policy. Some would consider this a disadvantage. Another disadvantage is the baseline cost of the insurance policy. A variable universal policy might be cheaper than a whole life policy, but it is still expensive. This type of policy can also be hard to understand. 

If you choose to invest in a variable universal policy, make sure you have the time to understand the ins and outs, especially how the cash value benefit works. It can be a more complex investment that requires further research than other types of investment. 

A variable universal policy could be a great match for someone who is already relatively wealthy, has time to learn about the complexities of this policy, and would like to use it for investing. 

Which type of life insurance is best for you?

There are a few key factors to consider when choosing a policy. The most important factor to consider is the cost of the insurance policy. How much can you afford to spend on an insurance policy? Be sure to inquire about fees associated with the policy you choose. 

Another factor is the duration of the policy. Figure out what term you prefer and decide which policy fits best. 

Finally, what benefits are important to you? Do you want to invest and use your policy to plan for the future? If these benefits are important to you, consider a policy that will help you build your portfolio and provide you with the best cash value.

Not all life insurance is created equal!

Is life insurance important? Absolutely! Is it complex? It can be! 

But knowing what you want and need from a policy can help steer you in the right direction. There are other ways to build financial security and set your family up for the future, too. You can get the help you need by building a strong financial portfolio.

The key is having knowledgeable support at your fingertips. From budgeting to investment accounts, MoneyLion can be the support you need to make the right decisions about your financial future!

Life takes many unexpected turns. No matter what happens, you’ll want to know that your loved ones are financially secure. The survivor benefit plan vs life insurance debate unveils two popular ways to provide your beneficiary with a financial safety net. Let’s jump into the differences between life insurance and survivor benefit plan coverage.

What is a survivor benefit plan?

Survivor benefit plan coverage gives your family inflation-adjusted annuities in the event of your death. Although no one wants to die early, it can happen. If your family depends on your salary to cover all expenses, it makes sense to provide them with a financial safety net.

What is life insurance?

Now that we’ve introduced the first side of the survivor benefit plan vs life insurance argument, let’s move on to life insurance. Similar to survivor benefit plan coverage, life insurance allows you to select one or multiple beneficiaries who will receive a payout when you die. 

Not all life insurance plans are the same, so it’s essential to consider your choices.

Comparing survivor benefit plan vs life insurance

Now that we have a basic understanding of survivor benefit plan vs life insurance, let’s jump in and look at some critical differences. Understanding these differences will assist you in your decision-making process and help you pick the right plan for your family.

Payment Source

The payment source of a survivor benefit plan is similar to that of social security. The ability to continue receiving payments depends on the next generation also investing money into the program. 

As long as each future generation supports the program, your payments are reliable. However, if future generations stop paying into survivor benefit plan coverages, problems can emerge later on down the road.

Life insurance companies operate differently. While part of the payout of life insurance depends on people continuing to take on life insurance plans, the insurers invest the proceeds into low-risk assets that yield returns while they wait to pay people out. 

Furthermore, some people’s policies expire before the payout. For example, some term life insurance policies expire prior to people’s death, meaning their beneficiaries never end up receiving the payout. 

This won’t ever happen with a survivor benefit plan. Life insurance companies strive to make a profit from their policies, especially term life insurance. On the bright side, the survivor benefit program does not have profit as its main goal.

Payment Schedule

Life insurance and survivor benefit plan coverage each have different payment schedules. Although life insurance presents the payout as a single lump sum, a survivor benefit plan provides a lifetime annuity for dependents. The annuity payments decrease the likelihood of a beneficiary squandering the money.

Furthermore, a survivor benefit plan’s payouts adjust to inflation. This same luxury isn’t relevant for life insurance payouts. It’s important to consider inflation because it is an essential factor in payout payments. 

For example, a $500,000 payout won’t mean as much 20 years from now. On the bright side, survivor benefit plan coverage allows you to evade this headache.

Taxing

The contributions you put towards your coverage add up over time. Budgeting for these expenses will save you from headaches in the future, but only one of them helps you with taxes. Payments towards a survivor benefit coverage plan are tax-deductible. That means you pay for the coverage using pre-tax dollars. 

Tax deductibles give you more for your money and they result in lower taxes as well. The more tax deductibles you can get, the better. Survivor benefit plan coverage aids in the goal to accumulate tax deductibles.

Uncle Sam has a different view on life insurance. Since life insurance is considered a personal expense, those premiums are not tax-deductible. Life insurance premiums erode your post-tax dollars, but the policy coverage can still provide peace of mind. 

If your budget is tight, keep the taxing element in mind. If you miss a single life insurance premium, your entire policy can become void. As such, it’s crucial to stay on top of your payments.

Health Conditions

Pre-existing health conditions play a significant role in the survivor benefit plan vs life insurance debate. While health conditions play no role in survivor benefit plan coverage, they can spell disaster for a life insurance policy.

Pre-existing health conditions will increase your life insurance premiums. Certain health conditions will affect your eligibility for life insurance policies or the ability to renew a term policy. 

Your insurer will ask you to complete a medical exam to assess your current health. Anyone who refuses will either be ineligible for the policy or face steeper premiums. 

Someone with pre-existing health conditions should heavily consider survivor benefit plan coverage in favor of life insurance. The premiums can rack up quickly especially if you have pre-existing health conditions.

Unhealthy behavior and hobbies will also increase the premiums you pay towards your policy. These obstacles are not present for survivor benefit plan coverage.

Beneficiaries

Under a survivor benefit coverage plan, a child can lose eligibility for payouts once they turn 18, or in the event that the child is a full-time student, the eligibility is lost once the child turns 22. 

To regain eligibility, the fallen hero’s spouse will lose eligibility by either dying or remarrying before turning 55. Life insurance policies do not cause these same headaches. 

You can list anyone as a beneficiary, including a family member, a friend, or a charity organization. You can split the payout between beneficiaries and decide how each beneficiary receives their payment, too. 

While the annuities decrease the chances of a beneficiary squandering the money, they may need the lump sum upon your death. Replacing your income is no easy feat for a grieving spouse. The lump sum life insurance payout addresses this issue.

Closing The Loop On Survivor Benefit Plan Vs Life Insurance

Life insurance isn’t for everyone, and neither is survivor benefit plan coverage. Both plans make it possible for you to provide money for your loved ones in the event that you die. They offer an extra layer of security and help to fortify your financial safety net.

MoneyLion can help boost your financial safety net. For only $1 per month, you can auto-invest into your financial portfolio through RoarMoney. 

Get started with RoarMoney today.

It’s common for people to wonder how does life insurance work. Although you continue paying premiums to keep your life insurance, your beneficiaries only receive the payout only after your death. The payout will provide your loved ones with a financial safety net to protect them from the unexpected. 

What is life insurance?

Life insurance provides your loved ones with an extra layer of financial protection. The windfall in cash from a life insurance claim can help your family cover their living expenses. When you can no longer produce income for your family and are no longer with them, your life insurance can pick up the financial slack.

What are the different types of life insurance policies?

You can choose from various life insurance policies. It’s important to review each life insurance policy and determine your needs before selecting the right policy for you. 

Whole life insurance

Whole Life Insurance is the most expensive life insurance policy, but it covers you for life. Once you get a whole life insurance policy, you do not need to worry about the life insurance payouts going through. As long as you continue paying the premiums, your beneficiaries will get the payout they deserve.

Best For: People who want a set-and-forget approach to life insurance.

Term life insurance

While Whole Life Insurance is set-and-forget, Term Life Insurance is the opposite. Rather than guaranteed life insurance payouts, Term Life Insurance only covers you for a set timeframe. If you select a policy with ten years and die 11 years from now without renewing, your policy will have expired. A poorly timed policy expiration will prevent your loved ones from making a successful life insurance claim. Term Life Insurance premiums are lower than Whole Life Insurance premiums, and you can renew your policy to mitigate risk.

Best For: People who want to save money with their life insurance policy.

Universal life insurance

Universal Life Insurance is a lifelong policy similar to Whole Life Insurance. However, Universal Life Insurance starts with flexible premiums that start low and rise over time. If you pay over your premiums, those additional proceeds grow at a minimum of 2% each year within your policy. This growth will make up for rising premiums in the latter years of this policy. 

Best For: People who want lower premiums at the start of their policy and a way to earn a guaranteed return from excess proceeds.

Variable universal life insurance

Variable Universal Life Insurance is similar to Universal Life Insurance, but with a distinct difference. While Universal Life Insurance offers a guaranteed rate of return, Variable Universal Life Insurance places the excess proceeds into a mutual fund of your choice. Rather than get a guaranteed return of at least 2% per year, the mutual fund’s performance dictates the return on your money. Historically, the stock market outperforms Universal Life Insurance returns, but the past is no guarantee of future results.

Best For: People who want the benefits of Universal Life Insurance but are willing to take on more risk to potentially exceed an annualized 2% return on their excess money.

Group life insurance

Some employers offer life insurance as a perk to their employees. Most employers provide basic coverage. You can add to your policy if you need additional coverage. Group Life Insurance offers lower premiums per individual due to the group discount.

Best For: Employees within a company that provides Group Life Insurance.

What to expect when applying for life insurance

A deep dive into the question “How does life insurance work?” requires an understanding of each policy. Not every life insurance policy is for you. Browse through several policies and find out what they offer. Determine your budget for premiums, so you never miss a payment. Consider your medical status and other factors when deciding on the best life insurance policy.

Application process

Although most people know they need life insurance, not everyone knows about the application process. You will meet with a paramedic for a medical exam and answer a series of questions about your lifestyle, health, and other personal information. Some life insurance policies require additional tests to get approved.

Health screening interview and medical exam

Most life insurance policies will require a health records interview or health examination. Life insurance health screening helps a company decide what premiums to charge if they approve your application. Not all life insurance policies require health screening interviews and medical exams, but these policies come at higher premiums. 

Determining coverage

When deciding how much coverage you want in your life insurance policy, you should consider your family’s cost of living and any current debts. The loss of an income source can hurt any family. Your life insurance policy can alleviate that pain. If you find yourself struggling to get the right life insurance policy because of a bad credit score, you can use MoneyLion’s Credit Builder Plus to build up your credit.

Deciding beneficiaries 

Deciding which loved ones receive the life insurance payouts is a big decision. Some policyholders split the proceeds amongst their children, but plans can change for various reasons. It’s important to review your beneficiaries list from time to time to confirm your feelings. You’ll invest considerable money into your life insurance policy. Make sure it’s going to the right people.

Budget for monthly premiums

If you miss a single monthly premium, your life insurance policy can get revoked. The risk of losing your life insurance is why you can never miss a single payment, and you should budget accordingly. You don’t want years of premium payments and hard work to go in vain. Budgeting for monthly premiums is a concern among people considering life insurance. It’s important to consider whether you should buy life insurance or not.

Understanding life insurance payouts

When you die, your beneficiaries can file a life insurance claim and claim their payout. Life insurance companies delay the payment to review the information and avoid fraud. Only then will the life insurance claim result in the payout.

Build your safety net one premium at a time

Not every life insurance policy is right for you. Finding the one policy that fits your needs provides your loved ones with a safety net when they’ll need it the most. Now that the question “How does life insurance work” has been answered, it’s time to strengthen your safety net further.

A MoneyLion investment portfolio can complement your life insurance policy and help protect your loved ones from financial hardships. MoneyLion offers fully managed ETFs so you can invest in a diversified basket of securities with no work on your end. Get started with MoneyLion investing today.

How does cash value life insurance work?

Premiums are paid on a monthly basis. The money is split into three categories: cost of insurance, fees, and cash value. The cash value money can be cashed out by the policyholder as long as the goal isn’t to leave a death benefit. 

Which type of life insurance typically has a cash value?

Cash value policies have a few different life insurance options, including whole, universal, indexed universal, and variable. 

• Whole life builds the cash value at a predetermined fixed rate. 
• Universal fluctuates in accordance with the market’s interest rates. 
• Indexed universal performs alongside the S&P 500.
• Variable life is basically the same as mutual funds.

How is the cash value of a life insurance policy calculated?

The cash value is calculated by subtracting depreciation from the replacement cost. This number will always change with time. The cash value amount will also increase with the premiums that you’ll pay on a regular basis.

How long does it take to build cash value on life insurance?

Whole life and universal provide cash value the day you pay your first premium. Indexed and variable cash value life insurance takes time, as there can be a few decades of wait time before decent cash value is accrued. 

Can I withdraw cash value from life insurance?

Yes, you can withdraw the cash value from your life insurance policy. If you don’t want to do that, then you can always get a MoneyLion Credit Builder loan for an instant influx of cash while you wait to build your cash value through life insurance. You can even take a loan out against your own policy. 

Is cash value life insurance tax-free?

Is there a penalty for cashing out life insurance? The answer is that it depends. If your payout is higher than the premiums you’ve put towards your policy, then you might owe income tax on your life insurance policy. But regardless, any interest that you have earned on the cash value of your insurance policy must be reported to the IRS.

What happens to the cash value when you die?

The beneficiaries will receive the death benefit after you die. Anything leftover in the cash value outside of the death benefit will be dispersed to your insurance company.

Example of cash value insurance

Billy has a policy with a $30,000 death benefit and a cash value of $4,000. Billy dies of a heart attack without touching his policy. His beneficiaries receive the $30,000 death benefit to help pay for the funeral. The $4,000 cash value is returned to the insurance company. 

The insurance company technically only has a liability of $26,000 that they will be required to payout. This value is calculated by taking the original death benefit of $30,000 and subtracting the cash value of $4,000 which equals $26,000. 

According to the IRS, the $30,000 death benefit that the beneficiaries would receive does not have to be reported on a tax return as it is not considered gross income. However, any interest that is received or earned will need to be reported to the IRS.

Things to consider with cash value life insurance

Before purchasing a cash value life insurance policy, please consider some of the following factors. 

Death Benefit

Ask yourself, “Do I want to provide a death benefit to my beneficiaries for my funeral? Do I even want a funeral?” You can always contribute monthly amounts to an IRA that could be specifically used for a funeral. But remember, death benefit proceeds do not need to be reported as income, so there is a major value to a death benefit.

Interest Rate

The cash value is most likely on a fixed returned rate. Ask yourself, “Do I want to take a risk and potentially earn more by investing this money by myself?” But then again, what happens if the market stops performing well and this guaranteed return is better than what you could get on your own? These are important scenarios to consider. 

Premium

Figure out if you want to lock yourself into a situation where you have to contribute a certain amount of money to your life insurance policy every month for the foreseeable future. If you decide to stop contributing to your insurance policy, you might face adverse repercussions, so make sure you are ready to commit to monthly payments. 

Age

It can take decades to actually build up a decent cash value via an insurance policy. You’ll want to think about whether or not the investment of time is something you can afford. Think about if it makes sense to buy cash value insurance or if you would be better off purchasing term life insurance at your age. 

Advantages of cash value life insurance

Death benefits are intended to help families pay for the funerals of their deceased loved ones. This is beneficial because funerals are generally really expensive. A death benefit is a thoughtful way to save your loved ones around $20,000.

If you are unable to make a payment to your cash value life insurance, you can use money in your cash value life insurance account to pay your premiums. This cash value may be used for emergencies if you have yet to build up you financial safety net.

Disadvantages of cash value life insurance

There are high fees and premiums associated with cash value life insurance policies. You can usually earn a better return on investment by investing in the stock market than agreeing to the fixed rate of a cash value life insurance policy. 

Cash surrender value vs death benefit

Life insurance cash surrender value is the amount of money offered to the policyholder when they request to cancel their policy. Death benefits don’t have to be reported on a tax return whereas surrender value is considered taxable income.

Expanding your financial assets with MoneyLion

Death benefits, premiums, surrender value, and fixed rates are only some of the many elements to think about when considering a cash value life insurance policy. Cash-value life insurance policies are a fantastic tool as long as they are well suited for your financial situation. 

If you’re interested in exploring various investment options like our effortless $1/month investment accounts. From aggressive to conservative investing, you can create a portfolio based on your comfort zone with as little as $5! Check out MoneyLion for more information about investment accounts and opportunities that can help you build a financial safety net!

Death is a tough but important topic to discuss, especially if you have others who financially depend on you. What will happen to them if you’re no longer around? That’s where life insurance kicks in. ?

1. What exactly is term life insurance?

Life insurance is a risk management tool that pays out a lump sum to your “beneficiary” if you die within the length of the term “policy” (some vocabulary may be unfamiliar, but keep reading and I’ll explain).

Shopping for life insurance? Learn the top 5 tips for first-time life insurance shoppers.

2. How does a term life insurance policy work?

A term life insurance policy is a written contract between an insurance company and an individual. You can take out a policy on yourself, OR your significant other can take one out on you. Sound pessimistic? Well, it’s actually very common for a person to have a life insurance policy on their spouse. You say pessimistic, we say practical!

3. What are monthly premiums?

The policyholder pays monthly premiums (payments) for a set amount of time to the insurance company in exchange for coverage. If nothing happens to the individual during that time, the insurance company keeps the money. This is very similar to how car insurance works. ?

4. How much is it going to cost?

Term life insurance costs, on average, between $25 and $35 monthly. The cost depends on the amount of coverage (i.e., the amount to be paid to your beneficiary in the event of your death) and other factors, such as:

• Age: Usually, the older you are, the more you’ll need to pay for life insurance coverage. This is because as you get older, health generally declines and the likelihood that the policy will need to get paid increases.
• Health status: When you apply for life insurance, you will typically need to take a medical exam and answer questions regarding your family’s health history. This helps insurers determine how healthy you are and the likelihood you will get sick.
• Driving record: A motor vehicle report helps insurance companies see if you’re a reckless driver and if you’re likely to get into a car accident.
• Hobbies: What you do on the weekends also helps determine the amount of your coverage. The more dangerous your hobbies, the higher coverage amount will be. Scuba divers and rock climbers, beware. ?‍♂️

Check out this blog to find out how much life insurance coverage you need.

5. Who can be my beneficiary?

A beneficiary is really any person whom you designate to receive the funds of your life insurance policy (should you bite the dust). There are usually two types of beneficiaries: A primary beneficiary and a contingent beneficiary. If the primary beneficiary is no longer around when your policy kicks in, the money would then go to your contingent beneficiary.

6. What is an insurance rider?

Riders are an important aspect of life insurance policies and help meet the specific needs of a policyholder. A rider adds or changes the coverage amount or terms of the policy, usually for an additional cost. For example, one of the most popular riders is the Guaranteed Insurability Rider, which guarantees that an individual can purchase additional coverage at a specific time without having to undergo an additional medical exam.

There are many different types of riders out there, and it’s important to read and understand each one as it relates to the policy you are purchasing.

7. Who needs life insurance?

Anyone who has someone who is financially dependent on them should consider buying life insurance. The financially dependent person may be a spouse, child, parent, or sibling. Many times, new parents purchase a policy that would help pay for their children’s schooling and other expenses should one parent die.

8. What about permanent life insurance?

Permanent life insurance is the term used to describe policies that do not expire. This type of insurance usually combines both a death benefit and a savings portion, which is put into an investment account to build value over time.

Permanent life insurance can be very complex, to learn the basics, check out the pros and cons of permanent life insurance.

Most people want to make sure their family is always taken care of, and life insurance is one way to do that. You’ve heard of million dollar lottery winners, but have you heard of million dollar life insurance payouts? 

Life insurance doesn’t require entering a lottery. It is a guaranteed payment that will be released to your family if the worst happens and you pass away. Life insurance creates a financial safety net, removing the financial burden that the loss of a family member creates and leaving a legacy of care to your family. 

If you’ve been avoiding life insurance because you think you don’t need it or it seems too expensive, read on to learn why it is actually one of the most important expenses if you want to protect your family in the future. 

Is life insurance worth getting?

Why do you need life insurance? The top answer is that it will replace your income and ease the burden—both financially and emotionally—for your loved ones. Life insurance payments can be either a lump sum or regular payments, so you can find ways to make it affordable. Plus, it will protect your loved ones when you die. In the worst-case scenario, you know they will be taken care of with the financial safety net life insurance provides. 

Life insurance becomes especially important if you have young children or dependents of any age, as well as if you support your spouse financially or there is a mortgage on your house that you pay each month. These are just some of the many reasons to get life insurance!  

Nearly half of all Americans don’t have life insurance. Of those surveyed, the number one reason for not having life insurance was a financial concern that it is too costly. But this is exactly why life insurance is important! Here are 7 powerful reasons why you need life insurance.

7 Powerful Reasons Why You Need Life Insurance

Life insurance can provide on-going financial support for your family. It can also cover funeral costs of the deceased. Beyond that, think of all the financial support your family will need. Insurance can cover a mortgage, medical and dental bills, college education, childcare, loss of income from spousal death, debt, taxes, and inheritance. 

The cost of life insurance varies based on the individual’s age, healthiness, the dollar value of the policy, and the policy term. 

• A healthy 35-year old man will pay as little as $17 per month for a $500,000 policy with a 10-year term.
• A healthy 45-year old female will pay about $118 per month for a $1 million policy with a  30-year term. 

How much insurance is required and the length of the policy will vary because these factors are affected by the number of dependents, monthly income, mortgage, and other financial goals or future financial requirements, like future college costs. It’s a good idea to calculate your life insurance needs to decide which policy is best for you! 

There are both life-long life insurance policies and term policies ranging from five to thirty years or more. As long as you keep paying the insurance throughout the duration of the term, the policy remains valid. 

Here are the main reasons to consider life insurance as an essential element of long-term financial planning:

1. Create a financial safety net

A financial safety net means that your family’s finances will be secure if anything happens to you, which is tremendously beneficial to their peace of mind. The best financial planning ensures that even in the worst-case scenario your family will be taken care of. This includes paying off a house, providing for children, planning for college education, and covering regular income lost.

2. Leave an inheritance

In addition to the financial safety net, life insurance provides the opportunity to leave an inheritance to your family, friends, and loved ones. This inheritance could help your children with future weddings, house down payments, or to start businesses or careers later in life. 

3. Pay off your debts

Credit card debt, loans, home refinancing, and other loans can all create undue financial burdens following the passing of a family member. While we recommend managing your money and avoiding debt, there are some debts that are unavoidable. Life insurance makes sure that in the event of your unexpected death, your family will be able to pay off your debts with life insurance.

4. Peace of mind

There are so many unknowns and an enormous emotional cost following the loss of a loved one. While the emotional burden can only be managed with time, the financial burden can be planned for and taken care of ahead of time. Life insurance gives peace of mind to your family because they know that they will be alright financially. 

They will have the resources to pay for the funeral, counseling, therapy, a move, or anything else that they need during their grieving process. Ease the burdens by setting your family up with a life insurance policy and early financial planning. 

5. Leave a legacy

Life insurance can also be your opportunity to leave a legacy. In your will, you can write a note requiring that a portion of your life insurance money is donated to your favorite charity, used to construct a building in your name, or given away to a charity of your choice. You can also create a foundation that your heirs can manage as a way of continuing work that was important to you. 

6. Protect your business

The sudden death of an owner can spell disaster for small businesses. Life insurance can provide the capital that will allow the business to transition to new leadership. Those funds can be used for re-building or restructuring the business to generate a continued income stream for your family and loved ones. Life insurance can be the difference between success or failure for the business after a sudden death. 

7. Supplement your financial safety net

In addition to life insurance, it’s important to build your financial safety net during your lifetime through regular investment strategies that will support and protect both you and your loved ones. MoneyLion investment accounts are one of the best ways to create this financial safety net. Good financial planning is a life-long activity. It involves taking the steps to build wealth, invest money, and manage debts. MoneyLion can help you to build this life-long financial security. 

You can control your family’s financial future

Why do you need life insurance? Life insurance is a way to build perpetual financial security for your family, protect your business, leave a legacy, and more. 

Building good financial health and leveraging financial resources during your lifetime with a MoneyLion account will make financial planning easier. When you sign up for a RoarMoney account, you can get a head start on securing your financial future!

If you don’t know the answer to this question, then it’s time to read on! In this blog post, we will discuss 12 factors you need to know that will determine your rate and help you understand the rates you’re receiving for your car insurance.

1. Location

Depending on your location, you could be facing a higher car insurance deductible. Insurance companies factor in both your state and zip code. Depending on how prone your area is to theft, crimes, floods, or wildfires, you may be subject to a higher rate. If you live farther away from a major city, you’re less likely to pay a higher price.

2. Type of vehicle

The car make and model that you drive is a significant factor in your rate. For example, suppose you are driving an expensive new car and financing the payment. In that case, your insurance will likely be pricier than if you were to drive around in an older model or economy-sized car that you bought outright with cash. 

The reason it’s so much more expensive when you finance a vehicle is due to the price of sports car parts and the statistics on crashes with newer, sportier vehicles. Sports cars account for vehicles with the highest fatal accident rate of 4.6 cars per billion vehicle miles.

3. Driving history

Are you a safe driver who has never had a speeding ticket, or have you been in trouble on the road? Your driving record, including any driving citations or violation tickets, can play a significant role in your car insurance deductible and rate. In addition, statistics show that people who have one or more violations on their driving records are at a higher risk of getting in an accident.

4. Driving experience

Young drivers are at a higher risk of accidents than older ones because they take their driving less seriously and often do not follow all traffic laws. This is why younger drivers are usually put into driver’s education courses for beginners or refresher lessons to improve their driving skills. 

The longer you drive, the less likely you are to get into an accident or act against the law. Car insurance companies will frequently consider your age and driving experience when determining your final rate.

5. Credit rating

Your credit rating has a significant impact on how much your car insurance will cost or if you’re even approved for a rate at all. If you have had late payments, judgments, or bankruptcies in the past, your rate will likely be higher than someone with excellent credit who doesn’t have any blemishes to their name.

Thankfully, there are many ways to fix your credit rating, such as a Credit Builder Plus loan, which helps build your credit safely and efficiently. We recommend MoneyLion’s Credit Builder Plus loan that not only raises your credit score while you save but, also allows you to have access to a portion of your loan funds immediately. It’s a win-win!

6. Gender

Gender can play a role in your car insurance rate if you’re a younger driver. While gender is not a deciding factor in your rate, it can affect how much you’ll end up paying for insurance. Young male drivers will typically pay more than female drivers of the same age because statistically, they have been proven to be riskier and therefore pose an increased threat to their insurer.

7. Annual mileage

Depending on the state you live in, the mileage on your car can impact your insurance rate. The more you drive, the more likely you are to have an accident on the road or encounter a problem with your vehicle.

8. Criminal record

If you have a criminal record, it can also affect your car insurance rate. While the number of points on your driving license may not be taken into account by an insurer, some carriers will give drivers with a clean history lower rates than those convicted for certain crimes, but it all depends on state laws.

9. Coverage level

Coverage levels will impact the final amount of your car insurance. Generally, more coverage will cost more money, so if you plan to purchase gap insurance or add in an umbrella policy for extra protection, these features come with higher premiums. Take the time to read through each policy to see if it’s right for you.

10. Insurance agency

The insurance agency you choose will impact the final cost of your insurance. Insurance providers are independent agencies that determine their own rates. The best way to find the options that are available in your area is by getting a quote from each agency along with copies of the type of coverage they offer.

11. Education level

If you have a college education, you’re less likely to pay high premiums because it’s assumed that you’re less likely to file a claim. While there is no statistical proof of this claim, many insurance companies still offer educational discounts on their rates.

12. Ownership of your car

Insuring a financed or leased car may cost more than if you completely own your vehicle, as the monthly payments will factor into your rates. Plus, insurance lenders can push for more coverage on a financed or leased car than you might have wanted to purchase in order to protect themselves if something happens to your vehicle.

Find the best car rate for your vehicle

The answer to “How much is car insurance for your vehicle?” isn’t straightforward. Many factors determine how much car insurance will cost on average, including your age, gender, driving record, driving citations, violation tickets, credit scores, residence, place of employment, the type of coverage you need, the type of coverage you want, and more.

If you want to lower your rate or find a better price, it’s time to evaluate each factor and see how you can work to get the best price possible for your car insurance. Whether you purchase an older car or boost your credit with MoneyLion’s Credit Builder Plus loan, you’ll be able to score the best rate on your car insurance.