As with any other type of insurance, the primary purpose of life insurance is to give peace of mind. If you unexpectedly or suddenly shuffle off this mortal world, the beneficiaries you name in your policy will get the benefits. They would typically be your family members.
How it Works?
Life insurance works like every other kind of insurance. When you purchase a policy, you will have to pay the annual or monthly fee, which is referred to as premiums. In the event of your death, the insurance company will pay your family or whoever you chose to name as your beneficiary. The amount that’s paid to them will be specified in the policy. Similar to the lottery, the beneficiaries have a choice of receiving the money all at once i.e. in a lump sum or in installments i.e. annuity. As opposed the lottery, life insurance is an investment that actually pays off.
Types of Life Insurance
When you start considering options for life insurance, you will discover that you have two types of policies to choose from; term or permanent. Let’s take a look at each:
- Term Insurance: This policy will cover you for a specific time period. For instance, if you choose a 20 year plan, keep paying your premiums and die in this duration, your beneficiaries will be paid. But, if you are still alive after the policy time is over, it will expire and you will have to get a new policy. The benefit is that you will be alive and the downside is that the money you paid as premiums will be wasted.
- Permanent Insurance: Also known as whole life or universal insurance, this kind of policy doesn’t expire. You can choose to pay it all at once, which not everyone can afford, or it can also be paid in installments. The best part about this life insurance policy is that it lasts forever and they also come with an investing element. Some of the money can be taken out as a loan or invested in the stock market, which means you can access the money when you are alive.
Where to Buy Life Insurance?
If you are doing a job, you can speak to your employer as some companies do offer life insurance as a benefit. You can also deal with an insurance company directly as there is no shortage of options and there are many companies operating in the market.
Who Should have Life Insurance?
Anyone who has kids or anyone else dependent on them for financial support should definitely have life insurance. If you have someone with special needs care or you have to support your spouse, it is a good idea to buy a life insurance policy because this can give you peace of mind as you know your loved ones will be provided for in your absence. Lastly, if you don’t want to be dumped into a low-cost nursing home when you are old because you cannot afford a good one, a life insurance policy can secure your future