Are you wondering what is life insurance used for and why
you may need life insurance?
If so, it’s a common question many people ask themselves when considering the purchase of life insurance coverage.
First, it’s important to understand what life insurance is.
Life insurance is a contract between the insured person and the insurance company. The insured agrees to pay premiums on a regular basis in exchange for a certain amount of life insurance.
And, if the insured person dies while insured by the policy, the insurance company pays out a death benefit to the beneficiary chosen by the insured.
So, you pay premiums to the insurer, and if you die, the insurer pays out a life insurance death benefit to your family (beneficiary).
What is life insurance used for?
There are many ways life insurance can be used to help those you leave behind.
Some of the more common reasons people buy life insurance include the following:
1. To replace the income of the main bread-winner in a family.
2. To pay off your home mortgage loan.
3. To pay for your final expenses, including funeral and burial costs.
4. To payoff credit card debt.
5. To allow your family to maintain the lifestyle they shared with you.
6. To pay for your child’s college education.
7. To provide for your spouse’s retirement.
The proceeds from a life insurance policy paid to the beneficiary can be used for any purpose.
And, the proceeds from a life insurance policy are usually paid without any federal income tax.
Life insurance can help you to provide financial security for the future of your loved ones, if you are no longer there to provide for them.
The most affordable type of life insurance is called "term life insurance".
Why is term life insurance the most affordable coverage?
Term life is temporary life insurance for a period of up to 30 years, or until you reach a certain age, such as, age 65 or 70.
Term life costs a lot less than permanent life insurance because it is temporary and it does not build up cash value inside the policy.
Term life insurance is "pure protection", not an investment. That means you can afford a lot more life insurance protection for your money with term life.
Many families, couples, homeowners, and young people choose to buy term life insurance because it provides affordable protection and flexibility of choosing your life insurance for a period of 10, 15, 20, 25 or 30 years, while you need it most.
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