No one likes to think about dying. But it’s a fact that everyone dies sooner or later. That’s why purchasing life insurance is a smart idea. When you die, the last thing you want is to leave your family in a financial bind. Life insurance is a way for you to provide for your family once you’re dead.
What is Life Insurance?
Life insurance is an agreement with an insurance company. The policyholder agrees to pay a monthly premium in exchange for the benefit of having life insurance. This means when the policyholder dies, then their beneficiary will receive a lump-sum, known as a death benefit. In most cases, the policy becomes void if the policyholder dies by suicide.
How It Works
This insurance is purchased to financially protect those who would be impacted upon the death of the insured. The policyholder designates a beneficiary to receive the benefit. The beneficiary then uses the money for things such as paying medical bills and burial expenses.
The three main types of life insurance are:
1. Term Policy: The benefits are paid provided the insured passes away within a certain time. This policy offers no additional benefits, and it requires low premium payments.
2. Whole Policy: Whole life benefits are available no matter when the insured dies. This policy also has an option where the insured can borrow money from it.
3. Universal Policy: This policy is basically a combination of the other two policies. It features a cash value determined by short term interest rates. And there is no time limit on when the policy is valid.
If your death would leave anyone struggling financially, then consider life insurance.