Life insurance is a useful policy designed to protect families once a breadwinner passes away. If you are the main source of income in your family, or if you have a lot of debts that can compound on your family after you pass, you should consider a life insurance policy.
Whether you need life insurance or not depends on your lifestyle and position in other people’s lives.
Is Life Insurance Required?
Life insurance is not generally required, although it is useful. Most people choose to purchase a life insurance policy once they have accrued a lot of debt or taken on heavy financial responsibility. This makes life insurance an optional but important insurance policy for people to consider.
If you have people monetarily relying on you, you may want life insurance so that they may receive compensation after you are gone.
How Life Insurance Works
When you purchase a life insurance policy, there are three common options: term life insurance, whole life insurance and universal life insurance.
A term life insurance policy is set only to last a certain number of years, such as 10 years, 20 years, 50 years, etc. This type of policy is useful for those who only want coverage as long as they have an accrued debt. For example, say you have substantial student loan debt. If you were to suddenly pass away, your loved ones would be saddled with that debt. With a term life insurance policy, you can have coverage until you expect to have paid off your student loan debt. If you pass away before the debt is paid or before the policy’s term is up, your life insurance policy will pay your loved ones benefits to help with the student loan debt as well as funeral costs and other expenses.
A whole life insurance policy, on the other hand, lasts for your entire life without term limits. With this policy, you can simply purchase a single life insurance plan and whenever you pass away, your beneficiaries can receive compensation for funeral costs, burial costs, shared mortgages, income replacement and more.
A universal life insurance policy is a unique type of whole life insurance. While this insurance lasts your whole life, it also allows you as the policyholder to withdraw cash value while the policy is still active. Withdrawing this money will not affect the benefits paid to your loved ones.