Life insurance can be essential for safeguarding the financial stability of individuals and their families. It can serve as a critical element in comprehensive financial planning. In the unfortunate event of the insured’s death, life insurance can address the financial needs of their beneficiaries.
What Does Life Insurance Cover?
Life insurance can serve as crucial financial protection for loved ones. When the insured passes away, the insurer typically provides a death benefit to beneficiaries listed in the policy. This benefit can cover various expenses, including the following:
- Income replacement for dependents
- Federal and state death taxes
How Does Life Insurance Work?
Life insurance involves an agreement between an individual and an insurer. The policyholder pays regular premiums, and in return, the insurer commits to providing a death benefit to the beneficiaries upon the insured’s passing. The primary purpose of life insurance is to help ensure financial security for dependents. Various policy types—such as term life, whole life, universal life and variable universal life—come with distinct advantages, restrictions and conditions that require careful consideration.
What Are the Main Types of Life Insurance Policies Available?
Understanding the different life insurance options can help you make the right choice based on your specific needs. The following are the two main types of life insurance policies:
- Term life insurance covers a fixed period—usually 10, 20 or 30 years. It pays out only if the insured passes away during that term. If they outlive it, beneficiaries receive no funds. Renewal typically requires applying for a new policy. Term life suits those seeking affordable coverage for specific periods, such as until children graduate from college.
- Whole life insurance offers lifelong coverage and typically pays out regardless of the timing of the insured’s death. It doesn’t expire unless premium payments cease. Additionally, whole life insurance may include a cash value component that grows based on the policyholder’s premium contributions. When enough cash accumulates, the policyholder can borrow against it or surrender the policy for a cash payout.
What Factors Determine the Cost of Life Insurance?
The following are some key factors that can determine the cost of life insurance:
Where to Get Life Insurance
If you’re in need of a life insurance policy, we’re here to help. Contact MTN Insurance Services to get started.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.