Financial stability is an essential and important goal of every household. However, even a family that is satisfied with their quality of life and has a reliable source of income is not protected from unexpected financial troubles. Life insurance is a fundamental part of financial stability that provides your loved ones financial support in the event of your death. Generally, people easily understand the importance of insuring their houses and cars, but they have doubts when it comes to the importance of life insurance. The reason for such confusion is primarily the lack of understanding of the features of different types of life insurance policies, as well as their associated benefits.

One of the terrifying consequences of dying is leaving your loved ones without any support. The larger the number of dependent family members, the greater will be the impact on their quality of life. In some cases, death can be accompanied by large medical bill that the family is not able to cover. The importance of being insured against such situations is impossible to overstate. Life insurance guarantees surviving family a certain quality of life, helps to cover funeral expenses and pays medical bills. In addition to helping the family to adjust to a new financial situation, life insurance can cover future expenses as well, for example, if the surviving spouse is not able to fund their child’s education, insurance can cover college expenses. It can also cover mortgages and loans that were taken out prior to the person’s death. It is important to keep in mind proceeds from life insurance are tax free and avoid probate.

With life insurance, one can finally put one’s mind at ease, knowing that in difficult times, one’s family will be protected. An economic and psychological theory called prospect theory helps explain why this is so important. This theory claims that an average risk-averse person would experience more pain from losing a certain amount than feel happy about winning the same amount. By extension, this means that a person would feel more comfortable paying a small premium to decrease the risk of a great loss. Peace of mind is an important benefit of having a life insurance policy.

In addition to the more common reasons for purchasing life insurance, such as avoiding financial distress and peace of mind, there are other benefits. Having an insurance policy can improve you credit rating, because it is considered a financial asset. This may be helpful when taking out a mortgage or other loan. Having insurance also develops a habit of long-term savings and encourages one to have a more stable and carefully crafted family budget.

There are many types insurance policies, and each has its own features. There is Whole Life, Universal Life, and Term Life. It is important to speak to a professional to find out which is best for you. Aiden Parker Associates focus’s on client needs. Call (201) 575-9494 for more information. Available in all 50 states.