There are a lot of misunderstandings with regards to life insurance and it would seem that a large portion of the population don’t really know what it’s for or whether they need it. Why would you need a pay out when you’re dead?
Of course life insurance isn’t for you, but rather the ones you leave behind. And thus it’s very important to familiarize yourself with the basics so that you aren’t leaving your loved ones to fend for themselves. Here’s an introduction that will tell you all the fundamentals.
Who Needs Life Insurance?
Life insurance pays out to your family or other financial dependents once you die. The main reason that someone might take out life insurance then, is often that they are the ‘bread winner’ of the household and worry that when they’re gone their family might not be able to support their current standard of living. Without life insurance, your loved ones may be forced to move home or your children could have to stay with a nanny. Even if you aren’t the sole breadwinner, life insurance can help give your partner more time to spend with the children.
But it’s not just parents who can take out life insurance. In some cases life insurance can be taken out for children, for elderly relatives and for others. The reason for this is often to help cover costs such as funeral costs (which can be very expensive) and to make life a little easier during the mourning period. Even if you are planning on having a <a href=”http://www.abbeycremation.com”>cheap cremation</a>, life insurance can ensure you get the send-off you deserve.
Types of Life Insurance
You might be forgiven for thinking that life insurance would automatically be ‘for life’. Actually though this is only one type of life insurance called ‘whole of life’. It’s also possible to take out ‘fixed term life insurance’ which you pay into monthly only until a fixed date – when your children leave home for example. There are also ‘decreasing’ and ‘increasing’ terms, where you will pay an increasing or decreasing amount of money over time and be entitled to a pay-out that gets larger or smaller. This might allow you to take out life insurance to match the value of your mortgage for instance, so that the pay-out will always be enough to cover the remainder of the mortgage so that your family at least own the house when you’re gone.
There is also life assurance where your money also gets invested and you can vary the way in which the insurance pays out. For example you can get insurance to pay out in a lump sum, to pay out in installments, or to do both. There are also completely different options such as annuities which pay out annually.
The value and cost of your life insurance will be up to you. Pay more each month and you will provide a bigger pot for your family when you are gone. Of course life insurance increases in cost however depending on your career and health, so look after yourself to get the best deal!
About the Author: The author of this post is Jennie Peters, an employee at Abbey Cremation Service, a company that provides affordable cremation in CT. Her hobbies include gardening and she has cultivated an organic farm in her backyard.