Since an unexpected death can happen at any time, life insurance is essential. While no amount of money can ease the grief that comes with losing someone, life insurance can reduce the financial burden that may arise. Here are the basics of life insurance:
How Life Insurance Works
Life insurance is a financial product intended to provide financial support upon death. You can purchase life insurance from a company and pay premiums monthly, bi-annual, or annual. As long as you keep up with your payments, the insurer will pay a lump sum of money to your beneficiaries upon your death.
Several factors will determine how much your life insurance policy will cost. Your age, gender, medical history, nicotine use, and dangerous hobbies determine your premium. For example, if you're a young, healthy individual who doesn't smoke, you'll likely pay less than an older, avid smoker with a history of a chronic condition like diabetes.
Types of Life Insurance
Not all life insurance products are the same. Here are some details on the two most common types of life insurance: term life insurance and whole life insurance.
- Term Life Insurance: If you invest in term life insurance and pass away before the term comes to an end, the death benefit pays to your beneficiary. As the name implies, term life insurance coverage is for a certain period. The benefit may be a lump sum, a monthly payment, or an annuity. Compared to other types of life insurance, term life insurance policies are very affordable.
- Whole Life Insurance: Unlike term life insurance, whole life insurance doesn’t have an expiration date, meaning you can’t outlive it. It features a death benefit and a cash value, which accrues interest at a fixed rate. If you pay your premiums, your beneficiaries can claim the death benefit if you pass away. You’ll also be able to tap into the cash value via a loan or cash withdrawal to use for other purposes such as retirement or education expenses.
Why You Need Life Insurance
Even if you’re young and in good health, life insurance is worth the investment. If someone depends on you financially, life insurance can reduce the financial hardship in the event you pass away. Life insurance also provides an opportunity to leave an inheritance, fund funeral expenses, or protect a business.
Consult Your Financial Professional
Together we can review your financial situation and determine the ideal life insurance policy for your situation. Contact us today to get started.