What is Life Insurance?
Life insurance is a financial protection tool that provides coverage for a fixed period of time (term life insurance) or for the entire lifetime of the insured (whole life insurance). It pays a lump-sum to a designated beneficiary in the event of the insured person’s death. It is designed to cover final expenses such as funeral costs, debts, and other financial obligations that are left behind.
Life insurance can also be used to supplement retirement income and as a hedge against inflation. No matter what the situation may be, life insurance can help provide financial security for the insured and their loved ones.
Types of Life Insurance
There are generally two types of life insurance: term life insurance and permanent life insurance.
Term life insurance is usually for a specified duration, usually 10 to 30 years. It pays out a designated monetary amount to beneficiaries upon the insured’s death under the policy’s coverage period. It is considered to be more affordable than permanent life insurance, although premiums tend to increase as the insured increases in age.
Permanent life insurance offers coverage for one’s entire life and doesn’t expire. It typically has level premiums that don’t increase with age. It builds cash value which can be borrowed or withdrawn and also includes an investment component that performance is based on the performance of the underlying investments.
Benefits of Life Insurance
• Provides financial security to beneficiaries
• Provides tax-free funds
• Can secure a future inheritance
• Can be used to supplement retirement income
• Allows for customization options
• Can cover debts and other final expenses
• Can be used as a will substitute
Life insurance is a valuable financial protection tool that can be used in a variety of ways. It is important to understand the different types of life insurance coverage and the benefits that can be gained from it. It is an important planning tool that can provide financial security to the insured and their loved ones.