What You Need to Know About Life Insurance
A life insurance policy provides a sum of money, known as the death benefit, to beneficiaries upon the policyholder’s death. It is an important part of any financial plan and can help provide security for loved ones.
When deciding on the amount of life insurance to purchase, consider your current and future needs. Take into account your debts, living expenses and funeral costs. Also, consider any future goals you have, such as funding children’s education or a retirement fund.
Life insurance is a contract between the policyholder and the life insurance company. In exchange for a premium, the insurance company promises to pay a designated beneficiary or beneficiaries a specified amount of money upon the policyholder’s death. Life insurance is not intended to replace income, but rather to provide a death benefit to help your family or dependents meet their financial obligations after your death.
There are many different types of life insurance policies available, including term life and whole life. Each has its own advantages and disadvantages. Term life insurance offers lower premiums and expires at a predetermined date. Whole life insurance has a longer duration and builds cash value over time. However, the initial premium is often higher than that of term life insurance.
Beneficiaries: The beneficiary or beneficiaries are named by the policyholder and can be anyone, including family members, friends or charitable organizations. Some people even name trusts as beneficiaries of their life insurance policies, allowing the trustees to manage the funds according to their wishes. You should review your beneficiaries periodically to make sure they are up-to-date. It is a good idea to include contingent beneficiaries, who will receive the death benefits if your primary beneficiaries die before you.
Payment: The policyholder must pay a monthly or quarterly premium to maintain the policy. If the premium is not paid, the policy will lapse and your beneficiaries will not receive any death benefits. If you believe that you will be unable to continue paying your premium, contact your insurer to discuss options. A lapsed policy can be reinstated, but you will likely have to pay any past-due premiums plus interest and may be required to renew the medical exam.
Cost: The cost of life insurance varies by age, gender and health. In addition, lifestyle factors such as driving history, criminal record, dangerous occupations or hobbies and tobacco use can impact your rates. Taking steps to improve your health and losing weight can also lower the cost of your life insurance.
Whether you choose a term or whole life policy, it is important to review your coverage on a regular basis. If your situation changes, such as a divorce or birth of a child, you should re-evaluate your life insurance to determine if you need to increase the coverage amount. Also, it is a good idea to check your beneficiary lists and contact information annually to make sure they are up-to-date.