Life insurance is a guarantee that your family or estate will be protected financially in the unfortunate case of your death. It can help pay for funeral costs and ensure your family has an income when you’re no longer there to provide it. There are different types of coverage.
What is Life Insurance and Who is it For?
Life policies, unlike other insurance policies that cover you when you’re alive, provides coverage when you die. It pays out money to family members or whomever you designate as your beneficiary.
How Does it Work?
Although there are different types of policies, they all pay a death benefit when you die. The amount of the death benefit is determined when you take out the policy. In exchange for this coverage, you pay a premium monthly, quarterly or annually. The higher the death benefit, the higher the premium will be. The beneficiary can spend the money any way he or she chooses.
The main types of insurance are term life, whole life and universal life.
A term policy goes for a certain amount of time like five, ten, 15 or 20 years. Although it does offer a death benefit, the policy is only good for the length of the term. When the term ends so does the policy unless you purchase a new policy. It’s usually the least expensive, and the premiums will not change.
A whole life policy is more expensive, but it remains in force your whole life. In addition to offering a death benefit, it also has a cash value that grows over time and can be borrowed as cash or as a loan that can be paid back. Premiums on whole life policies may change over time.
Universal life, which is the most flexible of the three, offers both a death benefit and cash value. It’s the most expensive, but you can make adjustments on the policy throughout the term. You can change the term, premiums and death benefits.
Having an insurance policy covering your life can be better than money in the bank in the event of a death. It can be a guarantee that your family will not have to worry about piling expenses.