The Lack of Financial Literacy
By:
Arlissa Cardenas
The lack of financial literacy is the limited understanding of knowledge of financial concepts, principles, and products. Individuals with lack of financial literacy may struggle to manage their personal finances, make financial decisions, and to plan for their future. When it comes to Financial Literacy, many people don’t know about Life Insurance. Life Insurance is an important aspect of financial planning that often gets overlooked. Did you know that 42% of Hispanics have life insurance. Why is that you might think? It could be the language barriers, cultural differences, and the overall knowledge of what it is. There is a lack of education in the Hispanic community about life insurance. Increasing financial literacy about life insurance involves breaking down these barriers through education, awareness, and clear communication about its importance and benefits in financial planning. In this blog, I will be informing my readers about life insurance. How it works?Why is it important? and more.
Life Insurance is a contract between you and an insurance company where you pay premiums in exchange for financial protection for your beneficiaries in the event of your death. This provides a sum of money, known as the death benefit, to your chosen beneficiaries upon your passing. There are different types of life insurance policies, including term life insurance, which covers you for a specific period, and permanent life insurance, such as whole life or universal life, which provides coverage for your entire life as long as premiums are paid. Life Insurance is designed to provide financial security and peace of mind to your loved ones by helping them cover expenses and maintain their standards of living after you’re gone.
Life Insurance is important for several reasons:
Financial Protection: It provides a financial safety net for your loved ones in case of your untimely death, which helps covering expenses like funeral cost, mortgage payments, debts, and everyday living expenses.
Income Replacements: If you are the primary breadwinner in your family, life insurance can replace your income to ensure your family can maintain their standard of living.
Debt Repayment: Life Insurance can help pay off outstanding debts such as mortgages, car loans, and credit card debit, relieving your family from financial burdens.
Education Expenses: It can also fund your children’s education expenses, ensuring they have access to quality education even if you’re no longer around.
Estate Planning: Life Insurance can facilitate the transfer of wealth to your beneficiaries, providing liquidity to cover estate taxes and other expenses without the need to sell assets.
Peace of Mind: Knowing that your loved ones will be financially secure in the event of your death can provide peace of mind and reduce stress during difficult times.
Overall, life insurance is the foundation of any financial plan. With the right policy and the right sum assured, one can plan and build the future of their family without worrying about whether they would be present in person to witness it or not.
How does Life Insurance work?
Before you get a life insurance contract, there are several factors that determine the quotes which include:
Age
Gender
Health/Medical History
Coverage
Type of life insurance
The younger and healthier you are, the better your quotes will be.
Your beneficiaries will receive a death benefit only if your policy is in-forced when you pass away- meaning you have paid the required premiums while you’re alive. The death benefit can be used for any purpose your beneficiaries choose which often includes:
Paying for living expenses that were covered by the insured.
Paying off credit cards, medical bills,etc
Paying off funeral expenses
Funding children's college tuitions
Yes, many life insurance policies include living benefits. Living benefits provide you with financial support while you are still alive, typically in the event of qualifying illnesses, injury, or disability. Some common types of living benefits in life insurance include:
Accelerated Death Benefit: Policyholders can receive a portion of the death benefit if they are diagnosed with a terminal illness.
Critical Illness Benefit: Such as cancer, heart attack, or stroke can receive a lump sum payment
Long Term Care Rider: Provides coverage for nursing home care or home assistance
Chronic Illness Rider: Access a portion of the death benefit if they are diagnosed with chronic illness.
Living Benefits can provide financial support during challenging times, allowing the policyholders to maintain their independence.
Why is this important to me?
The topic of life insurance is important to me because throughout my life some of my family members have passed away and we have held car washes and GoFund Me’s for them but it still did not help financially. I have seen some of my family members struggle to gather money to help pay for the funeral expenses and although my family comes together and donate money sometimes it's still not enough. A funeral in California cost around $7,225 not all car washes and go fund me to raise that much money. Now that my parents have life insurance it gives me peace of mind to know that I won’t struggle to have a nice funeral for them both. My mom’s father passed away when I was around 3-4 years old and still till this day he doesn’t have a headstone because during that time my mom and her brother were the only two to help cover the funeral cost and all they could afford was to bury him. This pains me because every time she tries to visit him she can’ find where he is buried because he has no headstone and knowing that life insurance could’ve helped paid for the headstone and more but during that time they didn’t know about life insurance makes me want to make sure that both of my parents are covered if anything were to happen to them.
Why did I choose this Topic?
I choose to talk about Life Insurance reflecting on the lack of financial literacy because not everyone is aware of it and how it can benefit you along the way and not just when you pass away. Financial literacy education often focuses on basic budgeting, saving, and investing, overlooking specific topics like life insurance. Did you know that only 52% of Americans report owning Life Insurance, 30% of Americans say they need life insurance but don't have it yet, and more than 100 million Americans are uninsured or underinsured when it comes to life insurance. It is important because it addresses aspects of financial planning, risk management, and ensuring the well being of your loved ones both now and in the future.
Need a Life Insurance Agent?
(Contact either or and mention Arlissa Cardenas recommended them to you!)
Angel Arceo: Phone Number: (323) 614-2865
Christian Arceo: Phone Number: (323) 712-7899
Community Response:
Christian Arceo
Why do you think it is important for the community to know about life insurance?
It’s important to know because if you were to build a home, what’s the most important part of a home? It’s a foundation. Having life insurance is the fundamental vehicle to build your future.
How has Life Insurance impacted your life?
I’ve been learning about insurance for the past 8 years and the lack of awareness is impactful. When I was 22 years old my father was diagnosed with a terminal illness after being taken by surprise and experiencing chest pain. He went for a physical check up and was hit with the news that he only had 4 months to live. This is something very common; it happens in families when the bread winner becomes disabled, ill or unable to provide due to loss of income coming in. Luckily my father was responsible enough to look into life insurance 2 years prior to being diagnosed and was able to accelerate benefits while being alive. Today life insurance is a new way of insurance. There's so many options today from somebody being able to contribute $40-$50 for a million dollars of protection to someone being able to guarantee their money back if nothing happens to them. There’s far greater loss by not having a policy in place then the couple dollars and you will put aside to have one.
Works Cited:
Kilroy, Ashley. “How Does Life Insurance Work?” Forbes, Forbes Magazine, 4 Apr. 2024, www.forbes.com/advisor/life-insurance/how-it-works/.
Lamberg, Erica. “How Much Does the Average Funeral Cost? | Time Stamped.” Time, Time, 29 Feb. 2024, time.com/personal-finance/article/how-much-does-the-average-funeral-cost/#how-much-is-the-average-funeral-cost.
Lobb, Jennifer. “Life Insurance Statistics and Industry Trends 2024.” USA Today, Gannett Satellite Information Network, 19 Mar. 2024, www.usatoday.com/money/blueprint/life-insurance/life-insurance-statistics/.
Omololu, Dr. Enoch. “Why Life Insurance Is Worth Your While at Any Age.” Life Happens, 21 Mar. 2023, lifehappens.org/blog/why-life-insurance-is-worth-your-while-at-any-age/.
Singh, Sarbvir. “Why Is Life Insurance Important?” Forbes, Forbes Magazine, 15 Nov. 2023, www.forbes.com/advisor/in/life-insurance/why-is-life-insurance-important/.
No comments:
Post a Comment