Reasons to Buy Life Insurance

Whether you’re buying life insurance for yourself or on behalf of someone else, it’s an important investment to help safeguard your loved ones from financial hardship. Life insurance helps pay off debts, covers final expenses, and provides for living costs if the policyholder passes away.

A Life Insurance Policy is a contract between the insurer and the insured. In exchange for a premium, the insurer promises to pay a lump sum to one or more beneficiaries upon the death of the insured.

The person or entity who owns the policy is called the policyholder, and it can be either an individual or a business. The person or business who is insured is called the beneficiary. The amount of the death benefit is determined by how much coverage you buy, how long the policy lasts (term length), and what the premium is.

There are different types of life insurance policies, and each type is designed for a specific purpose. The most common is term life insurance, which has a set number of years that the insurer will cover you for (often 20 or 30). Once your term ends, the policy ends and you will no longer have any coverage.

Whole life insurance is a permanent life insurance policy that, depending on the type of policy you choose, can build cash value over time. The amount of the cash value depends on your age, health status, occupation, and other factors. The accumulated cash can be used to pay your premiums if you become disabled, or you can withdraw it or use it as collateral for loans.

The main reason to purchase life insurance is to provide a death benefit for your family or other beneficiaries. You can use the death benefit to cover your family’s living expenses if you pass away, pay off debts such as mortgages or credit card balances, and fund children’s college tuition and other needs.

Other reasons to purchase life insurance include:

Leaving a legacy for your heirs. You can choose to leave a death benefit to your family or you can choose to buy permanent life insurance with an accumulating cash value and take advantage of the potential tax benefits.

Elderly adults who need to supplement their income. Many elderly adults have significant medical bills and debts, and a death benefit can help cover those costs.

Young adults who want to lock in low rates. The younger and healthier you are when you purchase your policy, the cheaper it will be.

Some life insurance policies also come with riders, which are additional features or provisions that you can add to your policy for an extra cost. For example, you can add coverage for a chronic illness or disability to your basic policy. Your agent can explain what additional coverage is available and help you decide what options are right for you.