Close up of woman filling out life insurance form
- Business

What You Need to Know About Life Insurance

Life insurance is intended to provide a safety net for your family and dependents. It works on the premise that you cater to some people, and your death will affect them negatively. 

Life insurance is a way of making sure that your family and dependents are well-taken care of in the event of your death.

There are several frequently asked questions when the issue of life insurance comes up. This article will answer some of those questions and provide some insight into how life insurance works and its benefits.

Types of Life Insurance Policies

There are two main types of life insurance policies; these are term and permanent.

Term Life Insurance Policy

As the name suggests, this life insurance policy covers a period you set within which you are covered. It may be any length of time; five years, ten years, and twenty years, depending on your choice. 

If you die during the set term, the money will be paid out to your beneficiaries. If you’re still alive during the period, you have to get a new term policy or go without one.

Permanent Life Insurance Policy

This type of life insurance offers coverage for your entire life and comes with a cash-value component which is paid out to your beneficiaries in the event of your death.

Basic Features of a Life Insurance Policy

Death Benefit

This is the amount of money that will be paid out to your beneficiaries by the insurance company. This amount is precluded from tax.

Beneficiaries

This is the person, or the people who you have stated should receive the death benefit.

Policy Length

This is the length of time in which the policy is valid. During such a time, you will pay the premium, and should you die within that period, the insurer is bound by law to reimburse the death benefit to your beneficiaries.

Premium

These are the payments made by you, monthly or annually, to keep the policy in effect.

Cash Value

This is an investment element attached to a policy that increases over time. Term policies do not have a cash value.

With this information, you know the basics, and the fact that life insurance is essential cannot be overstated. Talk to an insurance broker today and get life insurance that best suits you. Be sure to deal with insurers that are credible and financially strong.

Frequently Asked Questions

At What Age Do I Need Life Insurance?

A life insurance policy has a monetary value attached. The younger and healthier you are, the higher the cash value. This is because you are expected to live a long and fruitful life, except an accident should occur. 

The longer you are expected to live, the higher the pay-out and the lesser the premium you have to pay. Therefore, the best time to get life insurance is when you are young and healthy.

What If I Have No Dependents?

The simple answer to this question is that you still may want it. You may have no dependents, but your death will always require certain expenses, especially for your funeral. Your life insurance can help cover such costs.

Another thing to consider is that even though you may not have any dependents, you can leave a legacy behind by choosing to make a charitable cause the beneficiary of your life insurance.

What Is the Best Life Insurance Policy for Me?

There are several types of life insurance policies. The best one for you will be determined by factors such as reason for life insurance, current health status, age, number of dependents, current financial status, and others. These factors are taken into consideration, and with the metrics they provide, your insurance broker will present you with the best life insurance policy to suit your needs.