Life insurance is a contract between an insurer and a policyholder. The insurer agrees to pay a designated beneficiary a sum of money (the benefit) upon the death of the policyholder. Life insurance can be purchased for many purposes, including estate planning, protecting your family’s financial security, and funding college costs.
There are two main types of life insurance policies: term and permanent. Term life insurance is the simplest form of life insurance. It provides coverage for a specific period of time (the term), usually 10, 20, or 30 years. If you die during the term, the policy pays out to your beneficiary. If you outlive the term, the policy expires and you receive nothing back.
Permanent life insurance is more complex than term life insurance. It provides coverage for your entire life, as long as premiums are paid. Permanent life insurance policies come in a few different flavors, including whole life, universal life, and variable universal life. These policies have different features and costs, so it’s important to shop around and compare policies before you buy.
What are the advantages of life insurance?
There are many reasons to purchase life insurance, but some of the most common advantages include:
– Providing financial security for your loved ones in the event of your death
– Helping to pay off debts or other expenses after you die
– Funding college costs for your children or grandchildren
– Paying estate taxes
– Encouraging retirement savings
As you can see, life insurance has many benefits for policyholders. It’s important to consider your needs and priorities before purchasing a policy, and to shop around for the best deal.
