What's life insurance for?

The primary purpose of life insurance is to provide a financial benefit to dependants in the event of the premature death of an insured person. The policy pays a specific amount called “death benefit” to the designated beneficiary when the insured dies. Life insurance is a contract between you and an insurance company. Basically, in exchange for paying your premium, the insurance company will pay a lump sum known as a death benefit to its beneficiaries after their death.

In exchange for regular premium payments, the insurance company pays a death benefit to your beneficiaries when you die. Depending on the type of policy you purchase, life insurance can cover natural deaths, accidental deaths, and even illnesses or injuries while you're still alive. Term life insurance provides coverage for a specified period of time and premium payments remain the same for the life of the policy. Healthier people are less likely to die soon, which means companies can charge them less for life insurance.

Permanent life insurance, such as full life insurance or universal life insurance, can provide lifetime coverage, while term life insurance provides protection for a certain period of time. If no one is dependent on your income and your funeral expenses don't harm anyone's finances, life insurance may be something you can skip. Universal life insurance may be less expensive, but premiums, death benefits, and the rate of cash value growth may vary, making the policy more complex. Life insurance is a type of policy designed to provide a death benefit (a sum of money) to beneficiaries selected after their death.

If you care for someone you love, such as a parent or sibling, you may want to purchase a life insurance policy to cover their financial needs after your death. Accidental death and dismemberment insurance covers both accidental deaths and serious injuries while you're still alive, and can be added as an additional clause or purchased as a stand-alone policy. In addition to being the most affordable type of life insurance, term life insurance is the most popular type of life insurance sold (71% of buyers) according to the Insurance Barometer report. Talk to your financial representative and see the illustration of your individual life insurance policy for more information.

In addition to funeral expenses, life insurance can cover the cost of estate planning after your death. Having the life insurance safety net can ensure that your family can stay at home and pay for the things you planned. Bankrate looked in detail at what a life insurance policy covers to help you navigate what may seem like a complicated market. However, permanent life policies, such as full life insurance, build up cash value over time and don't expire if you've already paid your premiums.

You answer more questions in detail and request a specific type of policy, the amount of coverage and the duration of the policy (if you're buying term life insurance).

Kenneth Fagundo
Kenneth Fagundo

Hipster-friendly beer maven. Total tv scholar. Infuriatingly humble social media ninja. Proud sushi specialist. Evil travel guru.

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