What is Life Insurance?
Life Insurance pays a death benefit in exchange for premium payments from the insured. Life Insurance protects your family financially after you die. The money can help against the loss of income and help pay off debts. Many insurance companies will say that you need 6-10 times the amount of your annual salary although some people do more and some do less.
Types of Life Insurance
There are two main categories of Life Insurance:
- Term Life Insurance – This type of policy lasts for a specific time period and is the best fit for most people. The cost is considerably lower than whole life insurance plans but you do not die within the policy limit then it expires and there is no payout.
- Permanent or Whole Life Insurance – This type of policy lasts your entire life and can include a cash value component that you can withdraw or borrow against while you are still living.
Do I need Life Insurance?
Here are the reasons that it is a good idea to have Life Insurance:
- It is an income replacement for your family so that if you were to pass away and your income goes away your family can still afford to live comfortably.
- Payoff debt to ease the burden on your family.
- Estate taxes are high and some use Life Insurance to pay estate taxes that may be due which in some cases can be more than 50% of one’s net worth.
- Funeral expenses can be very expensive and are the last thing you want your family needs to be thinking about while they are grieving.
- Leave behind something for your family that can relieve the financial stress that many go through.