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Life Insurance

Life insurance is a contract between an individual and an insurance company where the insurance company provides a lump-sum payment, referred to as a death benefit, to beneficiaries in the event of the insured’s death. In exchange, the insured individual pays premiums to the insurance company over a period of time. This insurance is intended to replace an individual’s income if they pass away. Therefore, this insurance can apply to nearly anyone who provides financial support for others. For example, it is especially important for those individuals who are married and have a spouse and/or children that depend on their income.

Life insurance works based upon the actual type of insurance, and the two primary types are Term Life and Permanent Life. Term Life is intended to provide financial protection for a specified period of time, and the premiums for that time are generally level. However, at the end of that period, Term Life policies may offer continued coverage, but at a much higher premium rate. Term coverage for twenty years is usually the best option for families with younger children as the insurance can protect the surviving family if the insured passes away. It is beneficial for replacing lost potential income during working years and can provide the insured’s beneficiaries with a general safety net.

Permanent insurance is insurance coverage for those individuals who feel that it is necessary to have coverage for the rest of their lives. This can be beneficial for individuals who feel that their heirs may need cash to pay inheritance or real estate taxes upon the event of their death. Although permanent insurance is very high in the first few years of coverage, the cost will never rise and insurance companies must pay out benefits as long as the premiums are paid on time. The major benefit of each type of insurance is that the insured can feel comfortable knowing that their loved ones will be financially sound in the unfortunate event of their death.