What is life insurance?
Life insurance is a contract that exists between the policyholder (the insured) and the insurer (the insurance company).
A policyholder pays a specified amount over a certain period of time to the insurance company in exchange for ensuring that a beneficiary is paid at the time the policyholder dies. This can include spouses and life partners as well as children. Insurance policies are purchased to support dependents financially in the event the policyholder becomes unable to do so.
There are different types of life insurance policies, depending on the coverage provided and the investment options available. For example, some policies offer a cash value that the insurer can use to borrow money.
What does life insurance cover?
Payments from life insurance payouts are used to pay for significant expenses:
– Home mortgage
– Car payments
– Loans/debt
– College tuition
– Lost income
– Living expenses
Types of LIFE Insurance
There are seven to thirteen different types of life insurance, each with slightly different coverage. However, they all fall under three main types of policies:
- POLICIES OF TERM LIFE
A term life insurance policy covers a specific period, usually from one to thirty years. Although a term policy may be less expensive, an individual could outlive the policy, thus losing coverage.
- WHOLE LIFE POLICIES
Permanent life insurance covers the policyholder for the entire duration of the contract. Although this policy is expensive, it provides coverage regardless of age, and the death benefits remain the same throughout the contract’s life.
- LIFE INSURANCE UNIVERSAL
A more flexible whole-life policy that offers options for premiums and cash values. These policies include guaranteed, index, and variable insurance. Cash value may be linked to a stock market index or fixed interest plan.
WHAT IS LIFE INSURANCE?
Life insurance protects families from the unexpected. Six simple steps are required to secure this coverage.
- Calculate your monthly income.
- Secure quotes.
- Choose a plan.
- Submit a request.
- Get approved.
- Activate your policy.
Financial experts suggest two ways to calculate needs: either multiplying the salary of the insured by 10 or subtracting total assets from long-term financial obligations.
After assessing the need, you can select a plan tailored to your priorities. Consider how much money the family needs to pay the mortgage and how dependent they are on an individual’s income. Also, consider the financial impact of a death.
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