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What Is Life Insurance and Why Do I Need It?

Of all the types of insurance coverage available, life insurance is one of the most important. Investing in life insurance isn't just for the elderly, as some people have been led to believe. It's for anyone who wants their affairs taken care of in the event that something happens. Read also: Hoping for the Best, Planning for the Worst.

life insurance

How does life insurance work?

Life insurance is a type of insurance that will be paid out upon your passing. When you purchase coverage, you will specify your beneficiaries - most often, spouses and children. Primary beneficiaries will receive payment upon your passing, while secondary beneficiaries will receive payments if the primary beneficiaries are no longer alive. You may have several beneficiaries specified on your life insurance policy, and you will be expected to divide the payout into percentages among them.

You will make payments to your life insurance policy on an annual or monthly basis. Some policies feature a double indemnity clause, which means the beneficiaries will receive a double amount should your passing be caused by accidental means. Read also: When To Buy Graded Life Insurance.

Purposes of life insurance

One of the main purposes of life insurance is to provide financial means for you to be buried or cremated after your passing. Funerals are very expensive, and generally cost between $5,000 and $20,000. Most families don't have this sort of money just lying around, so your life insurance money can be used to pay for this process.

Life insurance can also help your spouse or loved one pay off any debts that you owe, such as taxes and mortgages. Often the passing of a family member can leave survivors with unpaid debts, which, when combined with the loss of income, can be financially devastating. Payouts from life insurance will help cover the cost.

Most of us don't think about the fact that it is actually quite costly to die, but it is! If you die after a lengthy illness or in a tragic manner in which there is medical intervention of any type, the cost is even higher than usual. Life insurance may also be used to help cover any medical bills that are left over.

Most importantly, life insurance provides a sense of security for you and your family. If you earn a paycheck that helps support your family, a life insurance payout upon your passing will help them continue their lifestyle without interference from the loss of your income. This is particularly important in families where one person is the primary breadwinner, or where one person's income makes a substantial difference in the level of life maintained. Read also: Disabled People Can Get Life Insurance.

Everyone needs life insurance, and luckily, it isn't all that expensive. Many employers offer life insurance benefit to their employees, which is an affordable way to begin a policy. Even those who are self-employed or unemployed can receive policies through independent insurance companies, and the cost is negligible when compared to the benefits.

Make sure your loved ones are protected no matter what happens. Sign up for a life insurance policy for yourself today. It's one of the most responsible—and loving—things you can do for those you care about.


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