A life insurance policy states you will pay premiums to an insurance company over time, in exchange they will give a lump sum amount to your designated beneficiary upon your death. Your surviving family members will then be able to use the cash from the life insurance policy to pay for bills and living expenses. It is advisable to review your life insurance policy occasionally. Remind yourself to review your life insurance policy during major life events, like purchasing a house, getting married, or having a child.
There is no fixed amount of life insurance you need to have. If you have more dependents who depend on your income, you may need more life insurance than someone with lesser dependents. You should also consider potential future expenses your loved ones may have.
The life insurance payout could pay for their college education, moving expenses, or retirement. You can buy an individual life insurance policy from an insurance agent. You may also be part of a group life insurance policy through your employer or civic organization. If you are a veteran, you may be eligible for the VA’s life insurance benefits.
Tips for buying life insurance.
There are two main types of life insurance policies:
Whole (or universal) life insurance policies are permanent. Whole life insurance policy is in effect as long as you continue to pay the life insurance premium.
Other than paying a lump sum upon your death, some whole life insurance policies may have investment or savings component. What this means is you accumulate cash valuation over the lifetime of the policy, which means you can borrow cash from these sorts of policies in case you have to.
Term life insurance policies are in effect for a certain period or term. If you have term life insurance and pass away during the term, the insurance company will pay a benefit. The insurance company won’t pay a benefit or issue a refund if you live past the term that the policy is in effect.
Term life insurance policies are less expensive than whole life insurance policies. This is because whole life insurance policies are permanent and part of the premium you make is put aside for savings while term life insurance policies only cover a set amount of time.