Life insurance helps to ensure that all our final expenses are paid, such as burial and funeral services, and that insurance beneficiaries are taken care of. However, did you know that it can also provide many other benefits while we are alive?
A life insurance policy is a contract you have with an insurance company. You pay them a premium, and they will give a lump-sum payment to your beneficiaries when you die. There are basically two kinds of life insurance: term life and whole life. Term gives you coverage for a specific period. Whole life or permanent life insurance provides lifetime coverage that doesn’t expire. In addition, universal life insurance plans are frequently used to help with estate planning and to preserve wealth to be transferred to beneficiaries.
Term life insurance can be used to replace lost income during your employment years. It can provide a safety net for your family and help ensure that your family’s financial goals stay intact without your income, like paying for college tuition or the upkeep of a family business.
Whole life insurance is a type of permanent life insurance designed to provide the owner with lifetime coverage. The payments are usually fixed, and unlike term insurance, whole life has a cash value. The cash value works in the same way as a savings account and accumulates over time. Whole life policies can actually be sold by the owner to redeem part of the death benefit during their lifetime.
Universal life insurance policies can be used as long-term income replacement, which will last longer than your employment years. There are some universal life insurance plans that are created to focus on providing both death benefits and building up cash value over time that the owner of the policy may borrow against, while they’re living.
The amount you pay each year for your term or whole life insurance depends on several factors such as your health, lifestyle, and age. Your age when you apply for term or whole life insurance helps to determine the amount of your premium.
A life insurance policy is a guarantee that your family will be taken cared of when you pass. As noted above, the money they receive can help pay for your burial costs, any bills that you left unpaid, the mortgage, hospital bills, and any other debts.
Reference: Benzinga (April 2018) “Life Insurance Costs and Payouts at Different Ages”