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Life Insurance

Life insurance is designed to specifically protect against the financial loss that most often comes with the loss of life. There are many different scenarios where this type of insurance is helpful and useful. Some policies are smaller and designed simply to cover the expenses of a funeral and burial. When debt is higher, people with spouses and/or children have a need for a larger policy to cover the payment of debt in the event of a death. In addition, businesses will obtain a policy to protect themselves financially in the event of the death of a key employee.

This type of insurance is generally very straightforward. It involves the payment of premium in exchange for a financial award (called a death benefit) to a beneficiary in the event of the insured person’s death. The insurance comes in two basic forms: Term life and whole life policies. Term policies last for only a specified number of years. Once the term has expired, no additional premiums are paid, but no death benefit will be paid either.

Whole policies will eventually pay a death benefit, as they have no set date of expiration. As long as premiums are paid as required, the policy continues to be in force. Whole policies also build a cash value for the insured to use if desired. Universal life insurance is a hybrid of the two types of policies. It involves the use of cash value to offset the cost of premium. This allows for the purchase of a whole life policy at a lower premium.

Major benefits to whole life policies include the use of the cash in the policy while still living much like a savings or retirement account. It also is guaranteed to pay the death benefit regardless of the age of death. Term life policies have the benefit of being much more affordable. If a large amount of death benefit is needed to protect against premature death, a term policy can provide this protection.






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