7 Frequently Asked Questions About Life InsuranceLife Insurance coverage is an insurance policy that pays out a death benefit upon a policyholder’s passing. This type of coverage protects dependents who rely on either a fixed income (e.g., pensions) or the policyholder’s income. As a contract between the policyholder and an insurance agency, the insurance agency agrees to pay out a sum of money from a particular insurance company in return for a monthly fee over a fixed amount of time. There are three types of life insurance: term life insurance, whole life insurance, and universal life insurance. These coverages provide protection for different times throughout a person’s lifetime: Term life insurance is the most common type of insurance coverage available. This insurance policy is written for a set period, where the policyholder pays premiums until the time of their passing. Whole life insurance coverage is designed to pay a guaranteed minimum interest rate on the cash value inside the policy every year until the policyholder dies. Universal life insurance provides coverage similar to whole life insurance coverage but is more flexible to changes in the policy. Below, we’ve put together a list of frequently asked questions that each potential policyholder should be asking before purchasing a life insurance policy. Read through the list, then be sure to let us know if you have any other questions!
1. What happens if I die? Will my family be able to pay the bills and cover the cost of my funeral?Life insurance serves as a safety net for dependents if something were to happen to you. In terms of death benefits, life insurance can be used to pay off your debts and final expenses, leaving the excess amount with your surviving family members who rely on your income or pension benefits. You may also choose to put this money toward your children’s education costs.
2. Do I have enough financial responsibility to warrant life insurance coverage at this point in my life?Sometimes, young people starting out on their own do not believe that they need life insurance because they do not yet have a family to support. What they often forget is that insurance isn’t just for supporting families – it’s also an emergency fund to cover your obligations and expenses after you’re gone. You’ll also want to consider if you plan on getting married. Life insurance can protect your spouse financially against the risks associated with losing you once the two of you have started building a life together.
3. How can life insurance help me?There are multiple ways that life insurance can be beneficial to you. Some examples include:
- Keeping a home in the family
- Safeguarding your family’s lifestyle
- Protecting your educational plans
- Covering your funeral costs
- Keeping your small business open
- And more!