One of the most significant and long-lasting financial decisions of the head of a household is, to make the future of his/her family secure by buying life insurance coverage.
Life insurance is a legally binding contract between an insurance company and a policyholder in which the insurer promises that specified beneficiaries will be paid a benefit when the insured person dies. The insurance company promises a payout in exchange for the policyholder's premiums paid.
A life insurance policy will ensure that the most urgent financial commitments of a family are met even when a primary caretaker dies. Financial assistance usually includes mortgage and car payment commitments, medical costs, and college tuition expenses.
How Does Life Insurance Work
If a family member buys life insurance and when those members die, you receive death benefits from the premium that the insured person has been paying during his/her lifetime.
Life insurance can help cover funeral costs and medical care. It can also help cover your spouse or children's college education. You and your family members may also benefit from life insurance on their cars, boats, and any other property.
Why Should You Buy Life Insurance?
Life insurance provides financial assistance following an insured's death to living dependents or other beneficiaries. Here are some cases of individuals where life insurance may be needed:
Elderly parents who want to leave money to adult children
Most adult children commit their valuable time and money for the comfort of their elderly parents.
Life insurance assistance will provide direct financial help and can assist in reimbursing the expenses of the adult child when their parent dies.
Parents with children
After the death of parents of minor children, life insurance will ensure that the children have the financial support they need before they are able to sustain themselves.
Parents with special-needs children
Children who need lifetime care and who are never going to be self-sufficient, life insurance guarantees them that their needs are met after their parents pass away. The death benefit will be used to support the special needs of dependent children.
Young students whose parents incurred private student loan debt or cosigned a loan for them
When a parent has the responsibility for his/her child's debt, the child may choose to carry enough life insurance to pay off the debt after their parent dies.
Businesses with key employees
When a core employee such as a CEO or manager dies, it causes significant financial distress for a company. Life insurance will support the company by providing an insurable interest that would allow it to purchase a life insurance policy on that employee.
Types of Life Insurance Plans
All life insurance plans seem to be either term or pure coverage, or permanent coverage. Whole life policies have an additional investment aspect along with their feature as pure insurance or death benefit. Over time these policies create cash value.
These are some of the most bought life insurance coverage plans, which allows the insured person to meet all sorts of needs.
In the event of your death, premiums for a term policy offer a common payout amount while the policy is still operating. In fact, term coverage protects your family during the years when an unforeseen disaster may be the most financially damaging, like before your kids are grown or your mortgage is paid off.
Term life insurance covers a number of years and expires afterward. When you select the coverage plan, you choose the duration of the term. The terms generally are up to 30 years.
It shall remain in effect for the life of the insured until the policyholder ceases paying the premiums or withdraws the policy. It typically costs more than the term life insurance.
Guaranteed Issue policy is a form of permanent life insurance that is available to people with medical conditions who would otherwise not be insurable. Guaranteed life insurance does not pay a death benefit for the first two years of the contract unless the death is accidental.
In this scenario, the insurer pays the entire premium fee upfront instead of making installments.
Whole life insurance plans have a lifetime policy with the death benefits that do not expire. Simply whole life plans offer a guaranteed payout to the death and a cash value that grows over time. The premium for this form of policy is higher than for policies in the area of term life.
A form of permanent life insurance with an option of earning interest in cash. Universal life insurance has premiums comparable to term life insurance.
Variable Universal Insurance
In this life insurance plan, the insurer is allowed to invest in the cash value of the policy.
Burial or Final Expense
Burial expense is a type of permanent life insurance with a small mortality benefit. Despite the names, recipients may use the benefit of death as they wish.
Life Insurance Providers
There are 4 major companies in the United States: GEICO, Liberty Mutual, Progressive, and Nationwide. They each offer their own variety of life insurance products. Each of them has a slightly different structure.
GEICO is used mostly for general life insurance, which covers any kind of risk in your life and is very popular for young people and the working elderly. Life insurance is purchased in annual installments.
Liberty Mutual is used more for retirement insurance, covering both the worker and his family at different stages of his life. Unlike most other general insurance policies, Liberty Mutual's plan will pay all your money regardless of whether you receive an accident or not after your term is over. Like others, Liberty Mutual is much more popular for married people.
Progressive is popular for anyone who needs insurance to cover both his dependents and the accident. Many couples can use both the husband and wife's Progressive to pay for a portion of the accident. If one partner's insurance is enough, Progressive offers a discount for both of them.
Nationwide is used for all categories of life insurance, as well as other types of insurance such as car insurance. Nationwide covers all kinds of life risks (car accidents, natural disasters, and more) and is the most popular life insurance company in the United States.