Life insurance is a legally binding contract that promises a death benefit to the policy owner when the insured person dies. It’s a crucial financial tool designed to provide financial security for your loved ones in the event of your untimely demise.
What is Life Insurance?
Life insurance is a contract between you and an insurance company. As long as your premium is paid and the policy is active when you die, your beneficiaries can receive a death benefit payout to be used however they like — for final expenses, paying off outstanding debt, and even everyday costs.
Types of Life Insurance
There are two main types of life insurance: Term Life Insurance and Permanent Life Insurance.
- Term Life Insurance: This type of insurance provides coverage for a specific period of time, or term. If you die during the term, the death benefit is paid out to your beneficiaries.
- Permanent Life Insurance: This type of insurance provides lifelong coverage and has a cash value component that grows over time.
Why Do You Need Life Insurance?
Life insurance can provide financial protection for your loved ones in the event of your death. It can help cover funeral costs, pay off debts, provide income for your dependents, and ensure that your children can afford to go to college.
How to Choose a Life Insurance Policy
Choosing a life insurance policy involves considering your financial situation, your health, your age, and your long-term financial goals. It’s important to compare policies and premiums from different insurance companies to ensure you’re getting the best coverage for your needs.