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October 6, 2022
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FINANCE INSURANCE

Understanding Insurance

What a waste of money on flashy things like cars, mansions, and jewelry. According to the findings of a recent poll conducted by Edward Jones and the non-profit consumer education group Life Happens, eighty one percent of American adults consider their family to be their “most significant asset.” And a quarter of the individuals who participated in the survey acknowledged that their greatest concern was leaving their loved ones with unanticipated financial difficulties in the event that they were unable to work or passed away before their time. Which raises the question: if we are so concerned about safeguarding the things we value the most, then why do so few people purchase life insurance? If you ask the majority of professionals in the field, they will tell you that such plans may assist give important resources for anybody who is responsible for supporting loved ones. Despite this, the most recent statistics reveal that just 41% of families in the United States carry individual life insurance. According to Ken Cella, leader of the Client Strategies Group at the financial services company Edward Jones, “the majority of Americans have very few or no protections for the financial objectives they have set for themselves.” They may grasp the benefit of having emergency money to meet unexpected financial bills in the short term, but they are less shielded for the long-term financial ramifications. “They may comprehend the value of having emergency funds to cover unexpected financial expenses in the short term.” To put it another way, Faisa Stafford, president of Life Happens, puts it this way: “Emergency reserves are not a long-term financial answer, particularly in the event that a family’s principal earner were to pass away.” One or both of the following beliefs are likely to be to fault for a significant portion of the disconnection between what we will refer to as “the need to protect” and the reality on the ground: * The price is much too high. One may compare this to the urban legend that there are alligators living in the sewers of New York City. According to NerdWallet, when participants in the 2017 Insurance Barometer Study were asked how much a $250,000 term life policy for a healthy 30-year-old would cost, the median estimate was $500 a year, which is more than three times the actual annual amount of $160. The study was conducted by Life Happens and LIMRA, a global life insurance research and consulting group. But let’s imagine the potential purchaser of the insurance needed even greater protection for the people who depended on him. A subsequent calculation by Forbes magazine determined that the same inaccurate median estimate of $500 would be sufficient to purchase a 20-year term insurance with a million-dollar death benefit for a healthy non-smoking guy between the ages of 30 and 40. There are some individuals who spend more than that on cappuccinos and lattes in a single year. Having said that, costs may vary significantly depending on variables such as age, health, the quantity of coverage desired, and whether you choose with term or permanent insurance. The former is the most cost-effective option and protects the policyholder for a predetermined period of time (often no more than 20 years), while the latter maintains coverage for their whole lives (as long as you continue to pay the premiums). When calculating how much life insurance coverage may be right for you, online tools such as the free Life Insurance Needs calculator offered by Edward Jones may provide assistance with the aspects to consider. * The insurance that I get via my employer meets all of my needs.

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