Life is unpredictable and no one really knows what will happen tomorrow. That is why it is very important to be prepared for anything. Buying a life insurance policy not only protects your loved ones when you are gone but it’s also a very beneficial tool when you are alive.
Even though life insurance is a key pillar of personal finance, a lot of confusion and skepticism still remains around this topic. Many people around the world find it difficult or even avoid discussing the topic of their own demise. However, with proper information, you will be able to buy the right insurance policy for you and your family.
Here are 3 things you need to know about buying a life insurance policy.
- When Should You Buy Life Insurance?
The first thing you need to know is when you should buy life insurance. If you are single and you do not have any dependents, you may not necessarily need life insurance. A small policy that covers basic burial expenses should be sufficient. However, if you have dependents that rely on you financially, such as a spouse, children, business partners or employees, then you definitely need a life insurance policy to ensure that they don’t suffer financially when you die.
- Life Insurance Is a Contract
The life insurance policy you buy is a legal contract between you the policyholder and the insurance company you choose. For the premium payments you make every year or month, the insurance company will provide a payment to your beneficiaries upon your death. One of the key parts of the contract is determining who the main beneficiary of the life insurance will be. This person will get the majority share if you pass away.
Sadly, there are many dishonest insurance companies who unjustly delay or avoid paying benefits to beneficiaries. Such practices are wrong and illegal and this is why you need a team of life insurance attorneys to investigate and pursue the claims to make sure that the death benefit is paid in full.
- There Are Several Types of Life Insurance
Once you have decided that you want to buy an insurance policy, you will need to determine which policy is best for you and your loved ones. There are several types of life insurance policies in the market today. They include; term life, whole life, universal life, variable life insurance, and permanent life insurance.
With the term life policy, you will basically pay premiums that go to your beneficiaries in the event that you die. These death benefits can either be paid out as a lump sum, an annuity or a monthly payment. You can choose to pay your term life policy for a period of 10, 15, 20 or 30 years. Once the term ends, the policy expires.
A whole life policy has both a death benefit and a cash value. The premiums you pay are used to fund the cash value but the biggest percentage goes to maintaining the death benefit and paying fees. Whole life insurance can last a lifetime provided you pay the premiums.
The universal life insurance also has a cash value; however, there is a twist to it. If you decide to change the premium or the amount that goes to the death benefit, you can do so without getting a new policy.