A life insurance policy is designed to protect an individual’s family from the financial consequences of their passing. These policies range from small policies to cover the cost of burial to larger policies to cover the loss of financial income.
Who Needs a Life Policy?
Life policies are ideal for anyone who is concerned about the cost of their final expenses or their family’s financial situation after their passing. A burial can cost many thousands of dollars. A life policy is an alternative to saving up for this amount or paying it outright in cash.
How Does a Life Policy Work?
A life policy is paid regularly, either in term (usually for 20 years) or as a whole life policy (permanently). When an individual passes, that life policy will pay out the full amount of coverage. Life policies can be stacked. An individual could have and pay for multiple life policies, all of which can be used by the family after the covered individual’s passing.
What Are the Types of Life Policy?
There are two types of life policy. A term life policy has a very low premium and will pay a certain amount of money upon the individual’s death. A term life policy may cover the individual for ten to twenty years. After this time, they will need to acquire another life policy. A permanent life policy (also known as whole life policy) is more expensive but operates more like an investment account. It is permanent and can be cashed out (though with some ramifications and penalties). The premiums grow through investments and the total amount is paid out upon the individual’s passing.
What Are the Major Advantages of a Life Policy?
A life policy avoids putting a family in a difficult situation upon an individual’s death. For those who are the primary supporter of their family, it gives them peace of mind knowing that their family will have some of their expenses covered following their passing.
Life insurance is often offered with different forms of coverage. An individual could have life policies through their business, credit cards, and other areas. Consequently, an individual might want to check on their existing policies before getting another one.