Life Insurance

It’s not fun to think about, but life is very fragile. If you were involved in a fatal accident or met your end in some other untimely way, how would your family get by? If you’re the only earner in your family, the answer to that question might be pretty bleak. One precaution that many take for this very reason is taking out a life insurance policy. They aren’t for everyone, and they can be very costly depending on the type of policy, but purchasing one such policy can be a blessing for the insured’s loved ones. If you are wondering about taking out a policy, you have come to the right place.

What is life insurance?

Understanding exactly what life insurance means is essential before taking out a policy on yourself or a family member. In essence, it’s a contract between the policy holder, who is either yourself or whoever else may hold the policy, and the insurance provider. This contract states that the insurer will provide the policy holder with a specified sum of money to the beneficiary upon the death of the person who is insured. The premium paid to the insurer is either in regular intervals or in one lump sum, and the amount varies based on the plan.

Since a life insurance contract is a legally binding one, insurance providers take great care in writing specific stipulations and exclusions into the plan to decrease their liability in certain cases. Often times the insurer will negate the benefits of the policy in instances of fraud, suicide and rioting, among others, but only if it has been previously stipulated in the contract.

What types of policies are out there?

Life insurance policies typically fall into one of two main categories:

Protection policies: This type of policy is purchased to provide a benefit at the occurrence of a specified event, and is typically paid out in a single lump sum. A common subdivision of this category is term insurance.

Investment policies: In this case, the policy holder is trying to grow a sum of capital through the payment of premiums, either in one payment or paying at regular intervals. Some common forms of policies in this category, at least in the United States, are universal life, whole life and variable policies.

Term policies and permanent policies are very common forms of life insurance, and they differ on some very fundamental levels. The stipulations of each are too lengthy to list here. There are many different forms of life insurance that aren’t listed here, simply in the interest of brevity. However, it’s important to know that there is a policy out there to suit your needs, if indeed you do need to purchase life insurance (more on that later).

What are the benefits of taking out a policy?

The benefits of a life insurance policy will only come directly to you if you are the policy holder, which is often the case, but the insured’s family are also often the ones who receive the financial benefits. The main non-monetary advantage to the policy holder is simply peace of mind—it feels much better for the insured to know that their death will not cause any unnecessary hardship to their family or to those who hold their debt.

Who needs to get life insurance?

Not everyone needs life insurance, so it’s essential to carefully examine your current situation against these guidelines to determine whether or not you’re one of those that needs it. Something important to realize here is that most life insurance is sold by the agents themselves and not actively bought by consumers because they’re pushing high-commission policies. The truth of the matter is that the sooner you buy life insurance, the more options you’ll have and the better off you’ll be, generally speaking. Older individuals pay drastically higher rates on life insurance policies, so the sooner you buy the more money you’ll save. You should, however, wait to take out a policy until you have dependents.

If your children are almost out of college, chances are they won’t need as much extra income in the event of your death. If your children are younger, however, it may make more sense to buy a reasonable amount of life insurance. These are not meant to be exclusive guidelines to tell you definitively to either buy or not buy a policy; they are merely here to help you along the way to reach your own decision.