Let’s Talk Life Insurance
We all will obviously die and an important question to ask yourself is what would happen to your family if you were to pass away unexpectedly? Would they have enough money to live their lives comfortably? Would they have the resources to cope with the funeral costs? Carrying good life insurance coverage will certainly not halt the inevitable, but it can solve many of the financial issues that come along with it.
How It Works
When you purchase a life insurance policy, it can pay out handsomely to the named beneficiaries, normally family members, should the policyholder pass away. The amount the beneficiary obtains, otherwise known as the “death benefit,” is determined by level of policy protection you choose. Policyholders pay premiums on a monthly, semi-annual or yearly basis. The premium that is paid is determined by the amount of the death benefit and kind of policy one decides to carry.
Types of Policies
A whole life policy is the kind in which a policyholder to pay premiums for his or her entire life. This kind of life insurance is more expensive but it offers a cash value that can grow over the years, along with the usual death benefit. If you carry this policy, you can also borrow funds against the policy in times of need. Understand that if the loan is not paid back, the death benefit amount is decreased. Also, as funds accrue over time, the premiums of whole life can decrease.
A term life policy stays in effect for only a certain period of time, usually in “terms” of 15, 20 and 30 years. Different from a whole life policy, term policies only offer a death benefit and premiums will normally not change during the term length.
The universal life policy is more similar to the whole life policy but offers even more flexibility. A universal life policy gives the policyholder the option to make changes to the terms, the amount of the death benefit and the amount of the premium, if deemed necessary. Given this flexibility and the possibility of the policy value accumulating over time makes this normally the costliest of policies.
Generally, the main reason for having life insurance is to help in paying for burial and funeral costs. But benefits from this type of coverage can also be used by beneficiaries to supplement lost wages that the policyholder provided the family before death. Cash payouts can also be used to pay for mortgages or a child’s college education and so much more. Many people acquire policies that offer bigger death benefits so as to assure that loved ones will have the necessary funds to continue to live in the same manner as when the policyholder was alive.