iQuanti: Life insurance can offer financial protection to your loved ones in the event of your passing, along with many other benefits. And there are many different options you can choose from based on your coverage needs and budget. If you're debating if life insurance is worth the cost, here's what you need to know about the importance of life insurance to make an informed decision.
How Does Life Insurance Work?
Life insurance is a contract between an insurance company and policyholder where the insurer promises to pay a death benefit, or sum of money to your beneficiaries if you pass away unexpectedly. To keep a life insurance policy in force, the policyholder has to pay premiums each month or year.
The payout for life insurance is referred to as a death benefit, and it's paid to whoever is listed as the policy's beneficiary (or beneficiaries). The beneficiaries can spend the money as needed, whether to cover the loss of income, pay off outstanding debts, or take care of funeral costs.
The death benefit paid by life insurance companies is payable in most circumstances, including natural death and accidental death. Since policies may vary, you should read the fine print and contact your insurer directly for answers.
Types of Life Insurance
Here are the two main types of life insurance policies:
- Term life insurance: A term life policy is affordable insurance that can cover you for a specified term. It offers a death benefit at a set amount and predictable premium payments during the term, which typically ranges from 10 to 30 years. Many people choose to use term life insurance because they'll be in a different financial situation after the term expires and may no longer need the coverage. For example, someone with young kids may purchase a 20-year term policy with the expectation that after 20 years, kids will be grown and self-sufficient, and no longer in need of that financial protection.
- Permanent life insurance: Unlike the predetermined dates of a term policy, a permanent life insurance policy is for life as long as you live and continue making premium payments. These policies can also accrue cash value. For that reason, some people choose to use them as a dual life insurance policy and long-term savings vehicle.
Is It Worth It to Buy Life Insurance?
There are several benefits to buying a life insurance policy that may make it worth the cost:
- Financial protection for your loved ones: Getting the right life insurance policy means peace of mind knowing your loved ones will be cared for financially if you pass away unexpectedly. And it's hard to put a price tag on that.
- No restrictions on the use of funds: There are no restrictions on how the beneficiaries use the payout. For example, they can use it to cover educational expenses, funeral costs, or paying off debt like a mortgage. And the death benefit is often paid tax-free, meaning it will go farther dollar for dollar than taxable income.
The Bottom Line
Life insurance can afford peace of mind knowing that loved ones will be financially cared for if you pass. So if that seems worth the cost, and you're interested in exploring life insurance options that suit your needs, contact a reputable life insurance agent. Connecting with the right company means you'll be sure to find a policy that provides the coverage you want at a price you can afford.
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Original Source: Is Life Insurance Worth the Cost?
