Life insurance is something most adults should have to protect their family. If a person is extremely wealthy, then chances are they don’t need life insurance. For everyone else, life insurance provides a monetary payout to a beneficiary when the policyholder dies. Most people with this coverage obtain it to pay off debts when they die so their family isn’t faced with financial burdens.
Life insurance helps families avoid becoming destitute upon the death of the policyholder. For example, if the head of a household should die, then the family income would cease. The policy payout amount would cover expenses like funeral arrangements, mortgage, credit card balances, and other debts.
Young families often choose to purchase life insurance. At a young age, most people do not earn the income they will after years of experience. They also do not have a large savings account or retirement account. And if they have a new home, then the balance on their mortgage is high. So for them, a life insurance policy is often a smart investment.
Adults who have elderly parents may wish to obtain a policy for their parent. This provides benefits that can cover funeral arrangements and burial. Most senior citizens purchase policies to cover these same expenses. It is an effort to not burden their children with expenses associated with their death.
Whole life policies are life insurance and an investment vehicle rolled into one. The policyholder pays a monthly premium, and the policy amount is paid in full to the beneficiary when the policyholder dies. At the same time, part of the monthly premium goes into an investment fund, so the provider company and the policyholder realize a monetary benefit.
Term life policies offer a payout upon the policyholder’s death, but offer no investment option. This type of coverage is generally less expensive, and most people choose it. Keep in mind the younger the person, the less expensive the coverage, especially if the policyholder is in good health.
Most policies are written for a period of up to 10 years. As the individual begins to acquire wealth, they may decide to cancel the policy. However, the policy will pay out if it is active when the policyholder dies.