LIFESTYLE & TRAVEL

Understanding Life Insurance

Have you considered planning for the unexpected? Life insurance is one way that people try to take care of their families when they are no longer around. If this is something you plan to explore, let’s discuss a few things to consider when browsing for options.

What is life insurance?

You can think of life insurance as a contract between a consumer and a business. Life insurance allows a policy holder to make payments toward a premium in exchange for a lump sum payment that is distributed to designated beneficiaries in the event of the policy holder’s death. A beneficiary is someone a policy holder delegates prior to death to receive the funds from their chosen insurance policy.

Why get life insurance?

Consumers typically opt for a life insurance policy so their loved ones have support financially after they die. Life insurance funds could be used to pay for funeral costs, unpaid expenses the deceased left behind, or bills that were not covered by other insurance. These funds can also serve as income replacement if the one who passed away was the main provider for the household.

What cost factors should you consider?

Before choosing a plan, it’s important to consider what could affect your cost of coverage. For example, your current health, age, family medical history, and the type of policy chosen can determine your monthly premium costs. Be sure to review an insurance company’s requirements and fine print before making your decision.

What types of policies are available?

There are two common life insurance policy types that consumers typically choose from. One is term life insurance, which covers a consumer for a designated period of time that can range from 5 to 30 years. When your current policy ends, you have the opportunity to renew it for a new term if you’d like. The second type is permanent life insurance. This policy does not expire unless you stop making payments. This option can accumulate cash value on a tax-deferred basis. You can also borrow against these funds, but keep in mind that when you do this, your beneficiaries will receive a lower distribution of funds when you die.

Whether a life insurance policy is best for you and your family is up to you. You must determine what you can and cannot afford as you plan for the unknown. Remember that although it’s important to plan, it’s also important to maintain a livable lifestyle. Finally, use local resources and ask questions about what you should expect during the process to help you make the right decision.

Sources:

https://www.forbes.com/advisor/life-insurance/is-life-insurance-worth-it/)