It isn’t fun to think about, but it’s true: everyone passes away at some point. When your time comes, your family could be left with a financial burden that no one expected. For example, outstanding debts, funeral costs, and a loss of household income. However, if you have life insurance, this can be a less stressful time for your family. Life insurance policies pay out a tax-free, death benefit to cover all types of expenses once you pass.
Types of Life Insurance
There are two main types of life insurance: term and permanent.
In a term life insurance policy, there’s a time frame for coverage. If the holder of the policy passes within that time frame, their beneficiary receives the benefit. You could have coverage until you hit a certain age, like 65. Or, you could have coverage for a set number of years, like 10-20.
However, if you live past your coverage end date, the policy ends and there is no benefit. Term policies can be renewed to extend your coverage. In this case, your premiums – the amount you pay each month- could increase with the renewal. Term policies don’t have any cash value, so you won’t receive any money back when you cancel the policy. You also cannot borrow against your policy. Further, for most term policies, depending on the carrier, there is an option to convert part or all of the coverage in to a permanent solution.
The other type of life insurance is a permanent policy. This policy differs from a term policy in that there is no expiry date. Permanent life insurance stays in place for your entire life; it doesn’t expire at a certain age or after a set number of years. Just like if you pass away while the policy is in force, your beneficiaries will get a death benefit payout tax-free.
When it comes to permanent coverage your premiums are set and for the most part don’t change for your whole life. In addition, there are various permanent option available and depending on the kind of permanent coverage you purchase there could be a growing cash surrender value. This means that if you were to cancel your policy, you will be able to cash back or you could even borrow from the policy.
Who is My Beneficiary?
You can choose whoever you wish to be the beneficiary of your policy. It’s common for people to choose their spouse, children, another relative, or a close friend. Some even designate a charity as their beneficiary so their death benefit contributes to a cause they support. You can also choose multiple beneficiaries who your benefit will be split between. If the person you name is underage, you must also choose a trustee who will manage the benefit until they are of legal age.
Do I Need Life Insurance?
When you think about the people who will be affected by your passing, life insurance is a good idea. It provides them with financial security in a stressful time. This will give you piece of mind that those you love will be taken care of.
Contact us to learn more about your life insurance policy options.
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