It is important to make sure that your family is provided for in the event of an emergency. It can become very expensive to take care of all the costs associated with a funeral. That is why life insurance is such an essential part of prudent financial planning. Life insurance can help to provide financial stability during those difficult times.
Life insurance is best described as a contract between an insurance company and the contract purchaser. Life insurance provides coverage for the insured person in the event of death. The insured person designates a beneficiary that will receive a benefit in case of the death of the insured person. The death benefit depends upon the policy coverage amount and is typically paid out in a lump sum to all beneficiaries.
Policyholders purchase these insurance contracts by making premium payments. Payments must be made as stipulated in the contract for the policy to remain valid. Premium payments are typically made on either a monthly, semi-annual, or annual basis. Insurance contracts vary in cost depending upon the amount of the policy and the type of policy that is purchased.
Term life insurance policies are one of the cheapest policies on the market as they provide basic insurance benefits to policyholders. Term life cover insurance provides coverage for the policyholder over a short term basis. Term insurance cannot be redeemed for a cash value. These policies can either be renewed once the term is up or you can let them lapse. As long as the policy is still in effect when the policyholder dies, the death benefit is paid out. These policies are appropriate for a large segment of the population.
Permanent life insurance policies are a little more expensive but they offer a few more benefits as well. These policies have cash values attached to them which allow policyholders to sell them for cash. Permanent life insurance policies can also be borrowed against for cash if a policyholder chooses to do so. These accounts can also contain an investment component that will allow the policy to appreciate. The most common types of permanent life insurance are universal insurance and whole life insurance.
Ask an insurance agent to help you determine which type of life insurance fits your needs the best.