Don’t have a life insurance policy yet? Well, you are not alone! Many Americans don’t have life insurance, despite how important it is. If you aren’t too sure about what life insurance is or how to go about buying a plan, here’s a quick guide to help you out.
What Is Life Insurance?
In simple terms, life insurance is essentially a contract between the insurance company and you. You pay a premium to the insurer, for which you are offered coverage. If you pass away, the insurance firm provides a payout, called the death benefit, to your beneficiary.
Types Of Life Insurance
Life insurance can broadly be categorized into two types – term insurance and permanent insurance. Term insurance lasts for a specific number of years, usually up to 30 years. If you pass away while the policy is in force, your beneficiary is provided a payout. If you survive the policy term, no payout is made by the insurance company.
Permanent life insurance, in comparison, lasts for the remainder of your life. In addition to the death benefit, the policy also accumulates a cash value, which you can withdraw or borrow against. This added savings component makes permanent life insurance more expensive.
Premiums
The premium is a certain sum of money that you will need to pay the insurer in exchange for the coverage offered to you. Premiums will likely vary from insurer to insurer based on several factors like your gender, medical history, location, lifestyle, and marital status, among other things.
Why Do You Need Life Insurance?
Most people need life insurance. Here are some reasons why you may want to consider getting life insurance.
- Income replacement: If you have dependents and you are the sole or primary income earner, the payout provided by your policy can act as income replacement.
- Repay your debts: If you have a mortgage or other debts, it’s important to purchase a life insurance plan. If you happen to succumb to an untimely death, your beneficiary can use the death benefit payout to repay your debts.
- To pay for end-of-life expenses: Even if you don’t have any dependents or debts, it’s recommended that you buy a life insurance plan with a small coverage amount that will help pay for your end-of-life expenses.
So, make sure to do your research and purchase a policy that meets your needs!
