Life insurance is a form of insurance coverage that can provide money to your family members, business associates, or close friends in the event of your death. There are two main types of life insurance, term life and whole life. Term life insurance provides money only in the event of the insured person’s death, while whole life can provide money for other things, such as higher education expenses and retirement.
Generally speaking, term life insurance is the cheaper of the two options and is the “traditional” type of life insurance that most people think about when shopping for this type of coverage. Policies are purchased for a pre-set term and coverage amount. Usually the term or time period for the policy is set between ten and forty years. The policy will only pay out in the event of the insured’s death, and the amount paid remains the same throughout the term period.
A whole life policy is actually a combination of a term life policy and an annuity. This allows the policy to collect value over time. After paying premiums for a set number of years, the insured person can begin to collect money from the annuity portion of the policy.
Qualifying for life insurance is relatively simple. In some cases, a company will require the insured to have a medical exam in order to determine rates or eligibility. There are many policies available on the market, however, that do not require this.
Deciding what type of life insurance to buy, as well as the amount of coverage that is needed, are the two biggest decisions that anyone who has decided to buy life insurance must make. It is important to make sure that a person has enough coverage to provide care for his or her children until they are independent, as well as enough money to cover any funeral expenses.
Finally, it is important for the person purchasing life insurance to think carefully about the beneficiaries of the policy. As changes occur in his or her personal life, it is important to make changes to this beneficiary list. Removing an ex-spouse or including a new child are important changes that many people forget to make to their policies.