Buying life insurance means ensuring financial support for your family when you pass away. This type of insurance gives your family money if you pass away while the policy is still active. There are many benefits to having life insurance, but the most significant is giving yourself peace of mind knowing your family will be financially taken care of no matter what.
A simple explanation for life insurance is you are the policyholder of this policy, which means you’ll pay a monthly fee, also known as the premium. If you pass away while the policy is active, the insurance company will pay out a sum to your family, also known as the death benefit.
Those who receive the death benefit are called beneficiaries. These individuals include family members and other dependents. The death benefit can be considered a replacement of income so your beneficiaries can continue to afford their current lifestyle, including housing, food, bills, and so on after you pass away.
There are many different types of life insurance. However, term life insurance offers the best coverage for most.
Life insurance covers most causes of death, including:
- Natural causes
In certain circumstances, an insurer may not pay out the death benefit. These circumstances include:
- Application fraud
Everyone can benefit from life insurance, including:
If your partner relies on you for financial support, then you’ll need to help cover their expenses if you pass away. Even if you aren’t the only provider for your family, your death could help them pay for things like child care.
You don’t have to be married for your policy to benefit your loved one either. Individuals in domestic partnerships will qualify for life insurance with or without children. Anything you’ve cosigned with your partner will require them to pay the full cost once you pass away, so it’s important to help protect them from financial burden.
The death benefit will also cover things like your medical bills and funeral costs.
The cost of raising a child is very high, and it doesn’t include things like college tuition. Your children rely on you for just about everything from housing, food, and more. If you pass away and can no longer provide for them, a life insurance policy can ensure they are financially protected.
Unfortunately, minors cannot be named as beneficiaries of your life insurance policy, so it’s best to name your spouse or a legal guardian instead.
Just because you’re not married and don’t have children doesn’t mean life insurance isn’t necessary. You never know when you could get married or begin your family, so taking out a life insurance policy now can help you ensure the future of your loved ones.
You may want to consider life insurance in case your debts become the responsibility of your family when you pass away. Even if this isn’t the case, the death benefit can still pay for your funeral, which can save your family thousands of dollars.
The amount of life insurance necessary varies from person to person. It’s recommended you get a policy that covers outstanding debts, such as a mortgage, end-of-life expenses, and day-to-day expenses. Your term length should last for the entirety of your financial obligations. For example, if your mortgage is a 30-year term, you should have a policy that covers at least 30 years. At the very least, you may want to consider a policy that provides at least ten times your income in coverage.
If you don’t have enough coverage, your loved ones may still be liable for your debts, or they will not have enough money to sustain their current living standard.
You can decide between one of two types of life insurance.
Term life insurance offers basic coverage that covers you for a predetermined amount of time. After that time is up, you stop paying premiums, and the coverage will expire. Term life insurance is simple and affordable.
If you pass away during the term of the policy, your beneficiaries will receive a death benefit. However, if you outlive the term, you and your beneficiaries will not receive anything from the insurance company.
Permanent life insurance means you pay premiums for your whole life. When you pass away, your beneficiaries will receive the death benefit. Several permanent life insurances have a cash value component. The cash value component earns interest and increases in value over time, which can eventually increase the death benefit amount.
The cost of our life insurance policy depends on the amount of coverage you need and how risky it is for insurance companies to ensure you. Risk is determined by many factors, such as your:
If you’re more likely to pass away during the term of your policy, you will pay higher premiums. The good news is healthy individuals and those with less risky lifestyles pay less for life insurance.
However, if you live with a chronic illness such as Diabetes, premiums will be considerably more expensive. Matt Schmidt of Diabetes Life Solutions notes ” Life insurance companies are always going to view a diabetic as a higher risk applicant. Because of this premiums will be higher. Life insurance for type 1 diabetes is getting easier to qualify for, and rates have come down over the last three years. Also, life insurance for type 2 diabetes is currently priced cheaper than it’s been in the past.”
Applying for life insurance is easy. You can apply for life insurance online.
After you apply, you’ll be required to:
- Take a medical exam to confirm health information on your application
- Wait for the physician’s statement, which lists any conditions you’re being treated for and your prognosis
- Go through an underwriting process that assesses an insurance company’s risk
- Pay your first premium
Your policy will kick in on its effective date.
Life insurance may seem like another expense on top of your monthly bills, but it ensures your peace of mind and your family’s financial security if you pass away. Getting life insurance early can help you save money in the long run, even if you aren’t married and don’t have any children. Make sure to shop around to find the best policy for you.
About the Author:
Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. Matt is passionate about marketing and business strategy and enjoys San Diego life, traveling, and music.