What is life insurance
Life insurance is a contract between an insurance company and an individual in which the insurer guarantees to pay the insured a sum of money when the insured dies in exchange for the premiums paid by the insured while still alive. Life insurance is usually paid to the policy holder’s beneficiaries.
Five Benefits of life insurance
- In case of death, life insurance can replace your income for your family.
- A life insurance policy can be used to cover funeral costs and medical expenses.
- A life insurance policy can help cover living expenses for dependent relatives.
- As a death benefit, life insurance can be used to leave an inheritance to the policy owner's loved ones.
- Donating your life insurance policy to charitable causes is an excellent way to increase the impact of philanthropy goals.
What is the best Life insurance to get? Types of life insurance
Term and Whole life insurance are the two types of life insurance.
Term insurance
Term insurance is an insurance policy where death benefits are paid only if the death occurs during the term of the contract. These funds can be used towards the funeral costs or to cover the outstanding debt. Term Insurance is ideal for single adults with no beneficiaries per se.
Cons of Term Insurance
- The cost of term insurance increases as the policyholder ages.
- If the policyholder outlives the term of the policy, they or their beneficiary get nothing.
- You do not have access to the cash value of the policy during your lifetime.
Pros of Term Insurance
- Term insurance is more than whole life insurance.
- Payouts from the policy can be used to cover funeral expenses or used in paying outstanding debts.
Whole Life Insurance
Whole life insurance is a type of Cash-value life insurance where an investment feature where the insured amount earns interest that the policyholder can withdraw or borrow against in the case of an eventuality.
Whole life insurance is best for young families and investing in your child’s future.
Cons of Life Insurance
- It is more expensive than term insurance.
- You may be required to pay insurance premiums throughout your lifetime.
Pros of Whole Life insurance
Cash value accumulates in whole life insurance that can be used by the insured to pay for the policy or for borrowed if needed.
How to choose your life insurance
Choosing life insurance will depend on the stage of life that you are at.
If you are a single adult with no beneficiary, you may consider term insurance so that costs like debts, funeral costs do not form a burden on your loved ones at your death.
If you have dependent relatives, and young children, the cash value in whole life insurance can prove as a useful foothold or foundation as they start in life buying their first houses, paying for tuition, etc.
Conclusion
While life insurance may not be right for everyone, it is important to seek the advice of a finance or insurance professional before choosing life insurance.
Getting life insurance or not, anyone who owns any form of assets must protect their assets from remaining unclaimed in the event of their death. This can be done by simply implementing an asset tracking system like Cova, where you track everything you own in one place, and also aggregate all your passwords and important business and personal document in a vault.
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