The purpose of life insurance is to protect your family in the event of your (or the breadwinner’s) untimely death. The risk of death exposes a family or a business to financial risks such as loss of family/business income, taxes and unpaid debts, or even burial costs.
The traditional purpose of life insurance is the death benefit that will be paid to the beneficiaries in case the insured dies. It benefits the survivors. Life insurance has evolved over the years. Modern life insurance policies can be written for many different purposes. Other than death benefits, they can also pay before the insured dies. There are 2 main categories of life insurance: permanent (whole life insurance) and temporary (term life insurance).
Whole life insurance is composed of 2 parts: death benefit and cash value. A whole life insurance policy pays the beneficiaries when the insured dies. It is guaranteed to remain in force as long as the premium is paid, and the premium usually is fixed. The second part of whole life insurance is the cash value, which can be considered as a form of saving. If you decide to cancel the policy, you can realize a cash surrender value (depending on how long you have been paying the premium). You can also take out a loan against the cash value. Living benefits is another way to make use of the cash value of a whole life insurance. You can enjoy the benefits while you are still alive, or you can simply use the money to cover medical or LTC expenses. You don’t have to leave all the benefits to the beneficiaries.
Insurance companies have come up with all kinds of variations to meet all kinds of needs. For example, Universal Life policy is the most flexible. The face amount may be increased or reduced by the insured. The premium can also be adjusted.
On the other hand, term life insurance lasts specified number of years, though many term policies are guaranteed renewable at a guaranteed rate (without needing evidence of insurability). Compared to whole life, term life insurance usually costs significantly less in premium, partly because it has no cash value. Term life has a fixed premium through the duration of the term, and premium is usually higher for renewal. It only pays death benefit if the insured dies during the term. Term life can be used for more specific goals. Mortgage protection insurance is an example of term life insurance.
Mortgage Protection
What happens if an accident results in your (breadwinner’s) death? Do you have the protection for your family? Are they going to be kicked out of your home because they no longer are able to pay the monthly mortgage? You can get a term insurance that is specifically designed for this situation. This is known as a decreasing term life insurance. The death benefit decreases with time because the payout is for the payoff of the remaining mortgage only. Many mortgage policies also offer payout when the insured loses jobs or become disabled.
Final Expense Insurance and Long-Term Care
Your family will always come first. You wouldn’t want them to bear huge and unexpected financial burdens at the time of your passing. No matter what your age is, it’s absolutely essential to have a plan in place to protect your loved ones when you are no longer able. Final Expense insurance will pay for your funeral service, final medical bills and other associated costs.
Long-Term Care (LTC) Insurance gives you the financial means and the support options you desire. Whether you require in-home visits, assisted living or skilled nursing care, LTC Insurance lifts the burden from those around you, improving the quality of life for yourself and for everyone you hold dear.