The right type of insurance coverage can help protect a person’s family and assets. Life insurance is a vital type of protection. Here’s everything consumers need to know about life insurance.
Who is life insurance for?
Life insurance is an important purchase for anyone who:
- Has someone depending on their income
- Has someone depending on them to provide services
- Will have someone depend on their income or services in the future
Someone who provides for a family needs life insurance. If they pass away and their income disappears, without life insurance, their loved ones could struggle to pay the bills. But someone who provides services needs coverage as well. A stay-at-home parent provides valuable services, which someone might need to be paid to do upon their death.
Even individuals who do not currently have people depending on them should consider whether they will need coverage in the future. It is easier and cheaper to buy coverage when young and healthy. Those who wait until they have dependents and need coverage may develop health issues in the interim that make coverage harder or more expensive to get.
What are the basic components of a life insurance policy?
Here are the key components of a life insurance policy.
- Premiums: This is the amount a policyholder pays for coverage. It could be paid monthly or annually.
- Death benefit: This is the amount paid to beneficiaries upon a policyholder’s death.
- Cash value portion: When policyholders purchase whole life insurance, part of the premiums are deposited into a separate account and are invested. The policy accrues a cash value, which policyholders can cash in or borrow against.