Life Insurance and Its Benefits
Life insurance is a type of insurance that offers financial protection to beneficiaries of a policy holder upon his or her death. It is designed to help family members of the deceased cover funeral expenses and income that may have been lost as a result of the death of the policy holder.
This type of insurance policy is for those who have others who are financially dependent on them, such as children or a spouse. Typically the insurance policy is used to cover the expenses associated with a funeral and any outstanding debts the deceased may have. However, the policy may also be used to cover income that has been lost.
The most basic type of life insurance works by engaging in a contract with an insurance company and settling on the length of the contract, known as the term, and the coverage amount. Term insurance covers an individual for a specified period of time and pays beneficiaries a predetermined amount of money upon the death of the insured. The policy holder pays a premium to the insurance company for the length of the term. If the insured does not die during that term, no money will be paid out to beneficiaries.
There are other types of this insurance that can be used as investment vehicles. Such policies can build cash value that can be withdrawn by the policy holder under certain circumstances. Others can be used to invest in annuities and earn a guaranteed interest rate along with providing a death benefit. These types of policies are a popular choice for those interested in using insurance policies as a wealth-building vehicle.
The primary benefits associated with these types of insurance policies include the financial protection that can be provided to the family of the insured, particularly if the insured is the sole earner of a household that depends upon his or her income. Many insurance professionals have strongly endorsed certain insurance policies for the purpose of building wealth while providing a death benefit. Most financial experts agree that having an adequate insurance policy in place that pays a benefit upon the death of the insured is a critical component of a sound financial plan.