Life Insurance

Life Insurance Policies

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What is Life Insurance?

Life insurance is a financial guarantee that the policyholder’s beneficiaries will receive financial compensation upon the policyholder’s death. The compensation is intended to replace the income lost due to the policyholder’s death. It is also meant to pay for certain expenses, such as funeral costs, medical bills and other household expenses. It’s important to note that a life insurance policy can be purchased in anyone’s name. For example, a parent can get a life insurance policy for a child.

Who Needs Life Insurance?

This insurance is most popular with people who provide the majority of the household income. This person will usually have a family of two people or larger. If a person feels they won’t be around for much longer, then they definitely need life insurance.

Single people or those who provide less than 50 percent of their household income don't necessarily need to purchase this insurance. If they have enough money to pay for burial expenses and medical expenses, then life insurance isn’t a necessity. For anyone else, just calculate the cost of a funeral and look at the total expenses of the household. If those in the household won’t be able to survive without the extra income, then it is beneficial to purchase insurance.

The Details

The three types of life insurance are term life, whole life and universal life.

Term life – the insured person has coverage for 10, 20 or 30 years. When the person dies within this time, the family receives the promised amount. Premiums may also rise.

Whole life – there is no set time limit for coverage. This insurance provides cash value that accumulates with time. The policyholder can take advantage of the cash before death. If not, then the beneficiaries will receive the extra money with their benefits.  Premiums are fixed.

Universal life – this is permanent insurance that remains active as long as the premiums are paid. It also has an investment option, but premiums are flexible with pricing based on current interest rates.

The benefit of life insurance is that it provides for the family long after the policyholder is gone. Dealing with the death of a loved one is tough. It’s even worse when you have money problems on top of that. Life insurance is a good way to care for your family even in death.

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