Most people have some kind of insurance, either for their car, their home, or their health. But it's important not to forget the benefits of life insurance, which pays money to beneficiaries when the insured person dies.
HOW LIFESTYLE INSURANCE WORKS
Most of the time, the person who is insured pays money into the plan, called premiums, in exchange for a "death benefit," which is the money that is paid out when the person dies. If you're thinking about buying life insurance, there are a few things you should know that could go wrong.
TYPES OF LIFE INSURANCE POLICIES THAT ARE NOT THE SAME
You can choose from many different types of life insurance policies, but most of them fall into three main categories: protection, long-term savings, and protecting your estate.
Many people buy life insurance to make sure that their dependents will be taken care of if they die. This protects your current source of income. If you want protection, you might want to think about term life insurance, which only pays out a death benefit for a certain amount of time, like until you retire.
If you want to save money for the long term, you might want to look into a cash value policy. With this kind of life insurance, when you die, your beneficiaries get a payment based on the full amount of coverage, not the plan's cash value. Most of the time, the value of these plans is tied to an investment portfolio, which is how money builds up.
Another benefit is that the person who owns one of these policies can usually borrow from the money that has been saved up in the plan without having to pay taxes or fees. Depending on the policy, you can usually take out a portion of the cash value and not pay it back. You can also cancel the policy and get the money that has been saved up over the years.
Use life insurance to plan your estate.
Life insurance can also be used to plan your estate, especially if you want to save money for future generations. This kind of policy can cover one or two lives, and the money it brings in usually helps your heirs pay estate taxes and take care of themselves in other ways.
Now you have to figure out how much coverage you need to give your family the amount of money they will need if you die. After all, the reason you buy life insurance is probably to make sure that those who depend on your income will still get paid after you die.
WHO HAS TO HAVE LIFE INSURANCE?
Also, whether a family has one income or two, it's important not to forget about the need for life insurance. If either of your spouses dies, it could hurt your family's finances.
