Life Insurance Facts

Life insurance is one way you can buy peace of mind for very little money. Compared to the benefits, the cost is low. Each individual has a unique lifestyle and financial situation that is why there are several different types of life insurance available. When selecting the right type of life insurance, there are some facts to consider.

Protection policies and investment policies are the two basic types of life insurance. Protection policies aim to protect the financial situation of the beneficiary after the policy holder dies.

The most common type of protection is Term Life Insurance for a specified time limit. If the policy holder dies before the end of the specified term, the beneficiaries will get the death benefit. The premiums remain the same throughout the term, there is no cash build-up, and the death benefit remains the same.

There are a lot of things that need protecting, especially if the beneficiary depended on the income of the policy holder. Some things that would be covered are:

• Funeral costs
• Mortgage payments
• Educational costs for children
• Household costs if a stay-at-home mother needs to find work
• Living expenses
• Medical bills
• Debt repayment

Investment policies such as Whole Life and Variable Life allow for a cash build-up over the years. With Whole Life, part of the premium payment pays for the insurance, and the rest becomes a tax-free investment. The premium set at the beginning of the policy does not change over the life of the policy. The cash build-up will increase the death benefit when the policy holder dies or can be used during the course of the policy.

Variable Life policies begin with a low premium but it gradually increases over the years. The cash build-up can be invested to increase its value.

There are many misconceptions about life insurance. Some people think that if their children are adults, if they don’t have children, or if they have a substantial saving’s account, they don’t need life insurance. However, it’s better to buy affordable life insurance than to deplete a savings account, or, worse, leave the expenses for others to pay.



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