Life Insurance 101: What You Need to Know
Are you curious about life insurance? Here are some basics that you need to know.
A Simple Definition
Life insurance is a form of coverage designed to provide financial benefits to your family when you pass away. All plans of this type allow you to designate a beneficiary. That person can use the money for any purpose.
Who Should Have a Policy?
Whether you are just finishing school or about to retire, this type of coverage ensures there is money on hand to keep your loved ones secure even if you are suddenly no longer around to take care of them.
How Does It Work?
Your plan pays out benefits to the person of your choosing when you pass away. During your lifetime, it is your responsibility to pay into the plan and keep it current. As long as you comply with the terms and provisions found in the policy, it will remain in effect.
What Kinds of Coverage Are Available?
Term life plans focus solely on paying a fixed amount to a beneficiary. The plans are also only in effect for a specified length of time or term. If you pass away during that term, the provider will pay the designated amount to the person you designated in advance.
Whole life plans do not come with a limited term. As long as the premium is paid, it will remain in effect. Owing to the risk that the provider assumes by issuing the policy, there is usually the need to undergo and pass a physical. While pre-existing health issues may limit the policy in some way, this is usually only for a short period of time.
The Major Benefits
Life policies offer the comfort of knowing loved ones will have the financial resources needed to settle end of life expenses, pay the mortgage, or send the kids to college. Taking care of loved ones is often the main reason for securing the coverage.
Some plans also make it possible to build cash value that serves as an asset. There are plans that can be funded with investments, providing greater financial support for the beneficiary.
If you don’t have coverage today, start looking. Having a plan in place will be one of the smartest moves you will ever make.