Life Insurance
What is Life Insurance?
Life insurance is a form of insurance that pays a monetary value upon the death of the insured covered in the policy. It is a contract between a person and his insurance company where the insurance company agrees to pay a certain amount of money to the person’s beneficiary upon his death. Payments must be kept current of course.
Why Do People Get Life Insurance?
People take out insurance for a number of reasons. The main reason is to provide security to family members when they, the insured, die. That security falls under different types:
- Making sure children stay in school, whether it be private or a university.
- Providing enough money so spouse can stay home with children or afford childcare.
- Pay off mortgage and other outstanding debts.
What Types of Life Insurance are There?
There are actually several different types of life insurance. The three most common types are whole life, variable, and term life insurance.
- Whole life–portion of premium pays for insurance and remainder is a tax-free investment. The premium is set at the beginning of the policy and that does not change throughout the life of the policy. This policy allows a cash build-up that can be used during the course of the policy or to increase the death benefits.
- Variable–This policy is very similar to whole life policy except cannot use the money during the course of the policy. Also the policyholder gets to choose the investments. He is in charge of the various investments.
- Term life–This begins with a low premium during the initial stages of the policy. The premiums steadily increase as the insured grows older. There is no cash build-up and no increase in the death benefits.
How Much Does Life Insurance Cost?
There are many variables involved in figuring the cost of life insurance.
- Age–A 25-year-old nonsmoker has cheaper insurance than a 63-year-old smoker.
- Occupation–A skydivers insurance will be much higher than that of a school teacher.
- Health–A 30 year old in good health will pay less than a 28-year-old with hepatitis.
Who Needs Life Insurance?
It is a wise idea for everyone to carry life insurance of some sort and size. That includes the young and old alike. Most young people do not think they need it, they just assume it is for the older generation. However young people die every day from disease and accidents. Life insurance will help pay expenses left behind, such as medical bills, funeral expenses, and any outstanding debts (credit cards).
Getting life insurance on children may seem unpleasant, but should it is becomming more common. Final expenses can be very expensive, so can medical bills that could occur from a long illness. Life insurance is meant for the young and old alike and should be thought about seriously.