All About Life Insurance You Need To Know
If your learning all about life insurance, you’ve probably noticed there are a lot of policy options, benefits and components. Life insurance is a policy that will help your family survive financially in the event of your death. It’s a smart move if you’re the sole provider. Here’s all about life insurance.
All About Life Insurance Jargon
Upon your death, life insurance provides money directly to your named “beneficiaries” or “beneficiary,” such as your spouse, children or other loved ones. If it is a business relationship, your beneficiary could be your business partner(s). The money provided to your beneficiaries upon your death is referred to as the “lump sum” or “death benefit.” When you purchase life insurance, you are expected to make a payment, known as the “premium.” This can be paid at once or monthly, depending on the policy you choose. The premium payment is based on personal factors, such as your gender, age, medical history and the amount of life insurance you’re looking to purchase.
All About Life Insurance Uses
In the event of your death, your beneficiaries should know all about what life insurance is used for. The death benefit provided to your beneficiaries can be used primarily to make up the loss of your income, if you are the main financial provider. It can also be sued to pay off large debts, household debts, medical debits or other major expenses after your passing. Another large use is to pay for your funeral and death-related expenses. Some life insurance policies, such as universal or permanent policies, may provide money benefits while you’re still alive. These types of life insurance have a “cash value,” which means money can be withdrawn to pay for large expenses once you’ve accumulated a specific amount.
All About Life Insurance Types
When learning all about life insurance, you will notice there are different types of life insurance categories that are offered. Yet, there are two main categories you should be aware of:
The most popular and cheapest is term life insurance. Term life insurance offers coverage for a designated period of time, usually for one to 20 years. These policies pay the death benefit if you die during the time of coverage, but they do not build a cash value. If you stop paying your premium, then the policy will not be valid.
Whole life insurance, also known as permanent life, covers the entire span of your life and does not expire. Some of whole life policies accumulate a cash value, which would allow you to withdrawal money from your policy at a given time. Premiums are determined by your age at the time of purchase and typically do not increase as your age does. Some whole life insurance policies end premium payments once you reach a certain age or have been paying for 10 – 20 years. The face amount, which is the amount determined at time of purchase, plus the cash value will be paid to your beneficiaries upon your death.