What is the purpose of life…insurance? Quite a lot, as it turns out. Having a good life insurance policy can be the difference between your family having time and money to settle affairs and grieve peacefully and a stressful time full of paying down debts and financial anxiety.
Life insurance is a policy you pay into during your lifetime that, after your death, will disburse a lump sum to a beneficiary. Your beneficiary can be family, a loved one, a lawyer or trust, or a charity. Furthermore, life insurance, because it has a direct beneficiary, usually does not have to go through a probate process. This means that your family can receive a fast payout to deal with immediate costs.
Potential Uses for a Life Insurance Policy
- Replace Income for Dependents. If you are the primary breadwinner in your family, having a generous life insurance policy can mean that your family has a longer time to adjust to life without your income. This time can allow them to look for new or different jobs, or give them a cushion to allow for time off work. You can also use this money to create an inheritance for your loved ones, whether or not they are still dependent on your income.
- Pay Final Expenses. Funerals, probate lawyers, “death taxes” and other end-of-life expenses can add up. Having a life insurance policy can be a great way to ensure that your family has enough money on hand to deal with all the costs associated.
- Make Significant Charitable Donations. Using your life insurance payout to make a charitable donation can be a lovely way to leave a legacy beyond your immediate family. A charity might also be a good secondary beneficiary for your account.
Types of Life Insurance
Now that you know exactly why you need life insurance, here are considerations to make as you shop around.
There are two basic types of insurance: whole life insurance and term life insurance.
Term life insurance is generally the most inexpensive kind of life insurance, and the simplest. It will only pay out if death occurs during a designated “term,” usually about 30 years. Within term insurance, you can get level term insurance, where the benefit stays the same throughout the term. Another option is decreasing term, where the benefit drops in yearly increments.
Whole life insurance, on the other hand, will pay out whenever a policy holder dies. Both premiums and the benefit stay level throughout the term of the insurance.
Ensuring Your Family Knows About Your Policy
Unclaimed life insurances are a potential liability, so be sure to communicate with your family about your policy. Let them know what company your policy is with, and how to get in touch with them. You should also store the information online, on Jazmine.com so that it is easily accessible and on the cloud.
Updating your beneficiary information to stay up-to-date is a critical part of ensuring your family can actually enjoy the benefits of your planning. You can schedule an alert on Jazmine to review your beneficiaries once a year or so.