The main reason for buying life insurance on anyone’s life is to replace income “lost” or pay for expenses caused by the death of the insured person. If your child dies, there’s no lost income, but there will be funeral, burial and related expenses that could run to thousands of dollars, which might cause a financial hardship to the parents of the deceased child.
This is the most common type of permanent insurance policy. It offers a death benefit along with a savings account. If you pick this type of life insurance policy, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. The savings element would grow based on dividends the company pays to you.
Term insurance comes in two basic varieties—level term and decreasing term. These days, almost everyone buys level term insurance. The terms “level” and “decreasing” refer to the death benefit amount during the term of the policy. A level term policy pays the same benefit amount if death occurs at any point during the term.
Life insurance can be an essential part of financial and legacy planning. When shopping around for coverage, you may come across various products that fall into two main categories: term life and permanent life (also commonly referred to as whole life). Understanding the essential differences between these two main types of insurance can help you make coverage decisions according to your needs and goals.
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations: