Life Insurance

For those many of us who have loved ones depending upon us, the idea that they might no longer have us providing for them is a thought that is particularly heart-breaking. Apart from the huge emotional devastation of such an event, they’d likely find themselves facing severe financial hardship, making the effort of moving on all the more Herculean. This is how good life insurance can be a proverbial life-saver.

Life insurance is essentially an agreement made with an insurance company. The purchaser of such a policy agrees to pay a repeating monthly payment, or ‘premium’, in return for the security of knowing that, should tragedy strike, they will be the recipient of a lump-sum death benefit. The amount of this death benefit is figured by both the needs of the beneficiary and the budget of the policyholder.

Who Benefits?

This kind of coverage is designed to protect individuals who would be financially impacted upon the passing of the insured. Deemed as an ‘insurable interest’, it generally is necessary that the potential beneficiary be proven at risk for financial difficulty should the insured die, such as a spouse and minor children.

How It Functions

Good life insurance works in a myriad of ways and can provide different benefits depending on the kind of coverage chosen. There are three main kinds of life insurance. The most common and most inexpensive is term insurance. In this case, the death benefits are provided if the policyholder passes away within a certain time period or ‘term’. This coverage only provides compensation to the beneficiaries in the event of the insured’s death during this term. There is also whole life insurance which, unlike term coverage, has offerings that go beyond death benefits when death occurs during a term of years. With this type, the beneficiary is not only eligible for benefits when the insured passes away, but money also accumulates that allows the insured may borrow against should the need ever arise.  Finally, there is the universal form of life insurance that offers a cash value amount calculated by short-term interest rates. Similar to whole life insurance, it’s a good idea to consult with an expert before making a commitment to buy such a complex, yet flexible and potentially very helpful policy.

Should you be financially reliant on someone, or be the one responsible for the financial support of another, investigating such coverage could very well lead to saving you or your loved ones from experiencing financial hardship in the event of an untimely death.