We all know planning for the future is the smart thing to do — but that doesn’t mean we like planning for the worst. Get a grasp on life insurance now, though, and you can focus on the fun stuff.
What Is Life Insurance?
Life insurance is an agreement between you and your insurance company that in the event of your death, your beneficiaries will receive a lump sum payment. This payment comes from the monthly premiums you’ve paid throughout the term of your contract with your insurance company.
There are a few types of life insurance, and they each have different benefits.
Term Life Insurance
A term life insurance policy extends for a fixed period of time — 20 years, say. You might put term life insurance in place to protect the loved ones who depend on you from the negative impacts of loss of income.
Permanent Life Insurance
Permanent life insurance provides coverage until your death — not matter how far away that is. “Whole” life insurance, with fixed premiums, is a good option if your goal is to have a steady plan to compound your earnings with a set ending amount in mind. “Universal” life insurance premiums are more flexible, with the potential for changing along with the coverage amount. This is a good option if you anticipate income changes and you’d like some wiggle room, rather than being tied down to a specific benefit amount. Permanent life insurance premiums tend to be significantly higher than term life premiums.
If you’re still asking, “What is life insurance?” don’t hesitate to talk to an insurance broker or a financial adviser. It’s worth the work to know what coverage could truly benefit you and your loved ones in the years to come.