Life Insurance Policies
Life insurance coverage is an important element for a person to include in his comprehensive financial plan. In the event of the insured’s death, the policy pays out a lump sum of money to beneficiaries named on the contract. Not only are there an array of benefits to purchasing this type of insurance, but there are numerous types of coverage from which a person can choose.
Those who are main income earners for families or don’t have much set aside to cover emergencies should invest in an insurance policy. Normally, if family members are dependent on a person’s salary, this type of insurance can provide a security blanket to ensure financial responsibilities are still being met after the policy holder’s death. Not only can it help families fulfill longer-term obligations like mortgage payments or other debt, but it can also provide more short term relief in the form of helping to pay for medical or funeral costs if needed.
Another major benefit of this insurance is that certain policies allow for the holder to take a loan out against the policy or cash it in altogether. Unlike other investments like IRAs and 401K plans, there are no penalties or mandatory minimum amounts to access a person’s accumulated cash value.
There are four main types of policies that exist within the umbrella of this category of insurance. First, a term policy is strictly insurance-related, without any investment opportunities. Generally, this type of policy provides insurance for a specified amount of time and premiums are often lower due to the shorter length of coverage.
Second, whole life coverage provides benefits for an entire lifetime along with an additional investment fund component. Cash value builds each year and can be borrowed against without being taxed. Most often, the premium payments are fixed.
The last two categories include universal life and variable life. Both are permanent policies, but universal life is combined with a money market option, while variable life is tied to a stock or bond investment.
Ultimately, the multitude of life insurance selections means that a person can outline the perfect plan when aiming to provide a monetary safety net for loved ones after his death.
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