By Akram Mondal
Life insurance is one of those things that we all think we might need, but it seems so complicated that many of us just never get around to it. The truth is that the right life insurance can provide you with peace of mind that you won’t find anywhere else.
The good news is that selecting life insurance doesn’t have to be complicated, especially if you work with an insurance agent.
Put together by an insurance agency in Lawton, OK, here is some basic information about life insurance that can help you decide what type of insurance you need and how to get a policy that fits your budget.
The Basics of Life Insurance
Life insurance can seem complicated, but by understanding exactly what it is and how it works, you may find it isn’t so complicated. First, let’s talk about the two types of life insurance. These are:
Term Life
Term life insurance is effective for a “term,” or anywhere from 1-30 years. At the end of the term, it expires unless you renew it. There are some benefits to term life insurance, such as cash benefits that are paid to your loved ones. This money is tax-free and can help pay for your final expenses.
Term life insurance policies are generally less expensive than whole-life policies. Of course, they are not permanent, so you will have to renew. Depending on the company and your plan, you may be able to convert a term policy to a permanent one.
Permanent
Permanent life insurance policies last, well, permanently. If your premiums are paid, you have coverage. There are four different types of permanent life insurance:
Whole Life
You pay a fixed monthly or annual premium and get a fixed benefit (amount of money paid when you die). Whole-life policies also accumulate cash value, which you can cash out during your lifetime.
Universal Life
You have flexible premiums and benefits. You can change the amount that you pay for coverage if needed. If you change your premium amount, you may also have to change your coverage. Universal life policies often include cash value accumulation.
Indexed Universal Life
The same benefits and processes as universal life, but the interest rate is based on stock market indexes instead of a fixed rate. That means it could accumulate cash value.
Variable Universal Life
Offers flexible premiums and death benefits like universal life policies. However, it has the performance of an investment account. That means it could accumulate cash value depending on circumstances.
Benefits of Life Insurance
Different types of life insurance offer different benefits in terms of flexibility, premiums, and accumulation of cash value.
However, there are some general benefits you get no matter which type of plan you choose. This comes back to the peace of mind we mentioned earlier.
When you have life insurance, you have peace of mind that certain factors are accounted for upon your death, such as:
Income for Dependents
Life insurance can help replace income for dependents if the person who died was the primary source of income.
Paying for Final Expenses
Funeral and burial costs can be very expensive. Life insurance can help pay for these and other estate administration costs, medical expenses, or debts.
Creating an Inheritance
Want to create a financial inheritance for your heirs? A life insurance policy can help you do that.
Paying death taxes
Life insurance can help pay estate taxes, so your heirs or beneficiaries do not have to worry about paying taxes.
Creating a Safety Net
Life insurance policies that accumulate cash can serve as a savings account. You can borrow from or withdraw from these accounts during your lifetime.
The benefits you receive from your policy will vary depending on the type of plan you choose and your coverage.
Why Do You Need Life Insurance?
So why do you require life insurance? Here, we will talk about the different uses of life insurance.
Income
In the event of your death, you can secure your family’s income with the help of the insurance money. If you are the sole breadwinner of your family, the loss of income after your death can be life-altering and devasting.
Therefore, you take life insurance to replace your loss of income in case of sudden death.
Debt-Payoff
You might have taken a loan on your house or purchased a car; whatever it might be, you have a debt to pay off. However, you suddenly die because of unforeseen reasons, and your family must bear the burden of your debt.
Additionally, you burden them with your debt and the stress of paying back your debt. Furthermore, your family grieves your loss emotionally and financially.
You can avoid this situation if you have taken life insurance, which will give your family the money to pay off the debt. This will help your family retain your property and decrease the stress of paying off loans.
Retain Livelihood
Nothing can replace the loss your family will face in your absence, but they must continue their life after your death. When you take life insurance, you ensure that your family’s livelihood and expenses are covered in your absence.
Additionally, your family can retain their estates and pay off taxes on their estates in your absence. Furthermore, in the nuclear family, there are people one can depend on. So, ensure you have life insurance to secure your family’s future.
Find Out More about Life Insurance
Now that you know how to use life insurance, you can visit your nearest life insurance company to take out life insurance for your family. You can search online for the best life insurance companies and compare their policies to get the best life insurance.
If you want to learn more about life insurance and the best plan for your needs and budget, you may find contacting an independent insurance agent helpful. An agent can help you assess your goals and find the right plan.
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