Life Insurance Basics
Life insurance is considered an extremely important part of any personal financial plan. For many people life insurance is an important way to provide for loved ones if accidental death occurs. Here are some tips on the basics of life insurance.
Some of the many reasons that one should consider life insurance is if they have a family or children. If your family relies on you as a bread winner, you should definitely consider life insurance as a way to protect your family from financial ruin. Another important reason to look into a life insurance policy is to pay for final expenses. Final expenses such as funeral costs, taxes, etc can be a huge burden to family members. Life insurance can protect your family from picking up the cost of these expenses. A third common reason to look into life insurance is that many policies are a great way to have a savings. Some policies can have a cash value and be borrowed against or have a specific amount that can be withdrawn during your life.
There are a few different types of life insurance, however the two most popular are term life and whole life.
Term Life
Term life insurance is the least complex type of life insurance. This type of insurance is paid only if death occurs. The insurance is for a specific term, usually from one to thirty years. There are two types of term life insurance, level term in which the death benefit is the same over the length of the life insurance’s term or decreasing term, in which the monetary amount of the death benefit decreases each year of the term. The vast majority of term life insurance policies are level term.
Whole Life
Whole life insurance is also called permanent life insurance, it pays a death benefit no matter how long you live, from immediately to far more than 30 years. Whole life has many variations, but for the most part, you pay the same rate each year and the benefit does not increase or decrease. At a certain point in many whole life policies you can withdraw an amount based upon a cash value of a plan. For instance, if you are 75 years old and no longer need to care for a family, you can withdraw a cash value of the policy to live more comfortably.
