Life insurance: benefits and types

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Selecting your life insurance policy can take time. Choosing a plan depends on costs and the type of insurance policy you want. The cover will protect your loved ones. You can decide which beneficiaries will receive payment from the insurance company. This article discusses the benefits and types of life insurance policies.

Benefits of life insurance

Life insurance can cover expenses after your death and build wealth. Here are some of the benefits:

  1. Cover emergency costs

Life insurance covers funeral expenses, medical expenses, inheritance tax and student debt. In addition, the insurance policy pays off other debts that remain after the death. A life insurance policy ensures that your family members do not have to worry about paying these costs.

  1. Cover living expenses

If you have family members based on your income, your life insurance policy can replace the income. How long the plan covers your earnings varies depending on your insurance policy.

You can choose a guardian for your children. The payment from the life insurance policy can cover the expenses related to the education of the children. Costs include medical expenses, basic living expenses or school fees.

  1. Leave money for different causes

Policyholders can choose ways to divide their life insurance benefits. Payments can go to multiple people, including children and spouses. Additionally, you can decide to use the money to provide college funding, pay off mortgages, and donate to charity.

  1. Create wealth

Some categories of life insurance allow policyholders to invest. Investments will allow you and your beneficiaries to build wealth. In addition, you can transfer your assets or take advantage of tax advantages. Some life insurance policies offer non-taxable benefits.

  1. Guarantee the debt

Lenders can use your life insurance policy as collateral when you guarantee certain debts. For example, Unity Financial, Life Insurance Company policyholders can obtain a mortgage from lenders using a life insurance policy as collateral.

Types of life insurance

Types of life insurance policies include;

  1. Term life insurance

You buy a policy for a specific duration (term). The term of office varies from ten to thirty years. People can change the duration of the policy. The policy has no cash value. At the end of the term, it only expires if convertible. It is the most affordable life insurance policy.

  1. Permanent life insurance

Permanent life insurance policy is for life and its types include;

Whole life insurance

If you continue to pay premiums, the whole life insurance plan is valid. It creates cash value that you can get through withdrawals. The plan consists of fixed premiums.

Universal life insurance

The universal life insurance plan offers investment options to policyholders. Premiums may change over time depending on the cash value of your investments. You can also borrow from the insurance policy.

Combined or convertible life insurance

Combination life insurance may differ slightly from term and permanent policies. The plans provide options for obtaining payments in circumstances other than death. More and more policyholders are choosing life insurance plans that combine other coverage such as long-term care policies. Convertible life insurance can allow policyholders to purchase term insurance policies and later convert them to permanent life insurance policies.

You can use life insurance to cover expenses after death, secure credit and build wealth. A life insurance policy can be temporary or permanent.