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What is Life Insurance and Do You Need It?

Life insurance is designed to provide coverage for your funeral expenses in the event of your demise. Many people experience challenges raising money to cover burial costs when they lose their loved ones. A life policy is also designed to protect your family financially when you are gone, and it also offers other benefits that you cannot ignore. Read on to learn what life insurance is and the reasons why you might need one. 

What is Life Insurance?

Life insurance is a contract that exists between you and the insurance company. The insurance company pays a lump sum that is called a death benefit to the beneficiaries and covers your burial expenses when you die. The beneficiaries can use the money offered for different purposes like paying a mortgage, bills, covering their educational needs, and enjoy their usual way of life. 

There are mainly two types of life insurance policies that include term and permanent life. Term insurance comes with protection for a certain period of 10, 15, 20, 25, or 30 years. Permanent life insurance includes universal life insurance and whole life insurance, and it provides lifetime coverage. This policy is more expensive, and it generates cash value. You can sell your policy if you no longer need it, and you will get a lump sum.     

Protect Your Dependents

The most important reason for purchasing life insurance is to protect your loved ones who depend on your finances. When you die, the dependents will lose your income, and this is where a life insurance policy comes in handy to provide coverage for their financial needs. The death benefits will help provide cash to your dependents to cover different expenses they may need when you are gone. In other words, you leave a legacy for your family with a life insurance policy since it secures the financial future for your children.  

Supports Your Business

Your life insurance can also support your business and other risks that you experience in life. The professionals behind Woligo emphasize that with a life insurance plan, you can protect your business or your partner can buy the portion of your business without any problems. Your partner can enter into a buy and sell agreement where the payout goes to the deceased’s nominees, but they will not get a stake in the company. Many people are aware of the death benefits of life insurance policies, but they are not aware of other options that can strengthen their financial position.  

Clear Your Debts

A life insurance policy can also go a long way in clearing your debts after your death. Apart from covering your burial expenses, your insurance policy can also help clear your loans like a mortgage so your loved ones will not struggle with accommodation challenges due to the unpaid loan. Proceeds from a life plan can also clear other loans like an auto loan, personal loan, and credit cards. All you need to do is to buy the right type of insurance. 

Peace of Mind

Overall, your life insurance policy gives you peace of mind when you know that your family is financially protected in an unforeseen event. With this type of insurance, you can secure the financial future of your dependents. However, you must know that a life insurance policy is cheaper when you are still young and healthy. You also need to be a nonsmoker and prove that you have no chronic illness to get favorable rates for your insurance. 

Life policies usually run on uncertainties, and you may not be able to get a policy when you are above forty and with poor health. It can expose your family and leave them vulnerable if you fail to obtain a life insurance plan. It is imperative to buy a life plan early since your health can deteriorate at a later stage. Once you fail to get a policy, you leave your dependents in a precarious position since they may lose your income when you are gone.       

Life insurance is a contract that you enter with an insurer to provide death benefits for your family. When you die, your family will get a lump sum to cover your funeral expenses, and your policy will also replace lost income to your loved ones. With the right life policy, your dependents can enjoy the quality of life they are used to since it offers them protection when you are gone. Life policies also provide other benefits like supporting your business, clearing your debts, and giving you peace of mind.