About Life Insurance

What is Life Insurance

A life insurance policy might be the only insurance policy where the owner won’t see any benefits. A term life policy takes effect after the owner has died, and his or her beneficiary (ies) receive the proceeds. A whole life insurance policy includes both the benefits of a term policy, as well as investment factors. For the purpose of this article, we will be discussing term life only.

The reason people buy life insurance is to protect the assets and help the people and family of the owner following his or her death.

When an adult family member dies, the family’s financial situation is usually adversely affected immediately. If the deceased is the primary bread winner, there is an instant reduction in income. If the deceased is the primary caretaker of small children or disabled adults, the survivor, or policy beneficiary, will need immediate funds to hire replacement caretakers. The proceeds of a life insurance policy can smooth this transition and diminish the financial impact.

Most families have plans for the future, and when a wage-earner dies, dependents can be left without the means to finance a college education or new house. Life insurance policy proceeds can provide the means to achieve the goals that the deceased had for his family.

Medical and funeral expenses can overwhelm, if not bankrupt, the average family. A life insurance policy ensures that survivors have the ability to meet these expenses.

If the deceased left unpaid taxes and other debts behind, these must be paid from the estate’s assets before any distributions are made to the heirs. This can mean that heirs might not receive any of the benefits the deceased intended. The proceeds of a life insurance policy can be used to pay off debts and ensure that provisions are made for the heirs.

Before an insurance company sells you a life insurance policy, it will factor such things as your occupation, lifestyle, health, and family history. It goes without saying that a skydiving, smoking policeman with a family history of heart problems will pay more for a life insurance policy than a yoga practicing, vegetarian, non-smoking librarian. The riskier your lifestyle, the higher the premiums will be.

The younger the age of the applicant, the lower the insurance premiums. Many young people under the age of 35 do not even think about life insurance. They may believe there is always plenty of time, but there might not be. If a young parent dies, the surviving spouse will be left with the burden of paying bills and future college costs. If the deceased is single, parents or siblings will face debts and funeral expenses. If the deceased has a life insurance policy, such a burden will be greatly eased.

With many families struggling to pay basic bills, life insurance has become a luxury they keep postponing. Twenty-eight percent of wives and 15 percent of husbands do not have life insurance. Six million families are making due without such a policy. Life insurance is not a luxury, however, if the death of a family member can leave survivors without needed funds and without a safe future.