Planning Ahead: What Does Life Insurance Cover?
As an adult, there are a lot of things to think about that you never learned in school. Income taxes, mortgages, and health insurance are just a few examples.
Another thing you might feel uneducated about is life insurance. What is it, exactly, and what does life insurance cover? When should you get life insurance?
We’re going to answer all of your life insurance questions in this guide. Let’s jump in.
What Is Life Insurance?
Think of life insurance as a contract. You make a contract with an insurance company by making monthly payments. When you die, the insurance company holds up their end of the contract by paying a death benefit to your family or beneficiaries.
In the beginning, life insurance was used to help widows, widowers, and orphans cover the cost of a funeral for their loved ones. Now, it has many more financial benefits.
Types of Life Insurance
How much money the insurance company pays your family depends on the type of life insurance policy you get. There are two types: permanent life and term life.
Permanent life is the more expensive option, but it builds more cash value over the years as long as you continue to make payments. If you need to, you can borrow from the cash value of your policy while you’re still alive.
Term life insurance is more affordable, but it only lasts for a set period. For instance, you can purchase a 10, 20, or 30-year term life insurance plan.
If you die during the term, your beneficiaries will be paid. However, if you outlive your term, the life insurance company does not pay anyone.
When Should You Get Life Insurance?
Most people don’t think about getting life insurance until they are older. However, it’s smart to purchase it when you are young.
First, because premiums are cheaper at your age. Secondly, the more you pay in, the bigger payout your family will receive.
If you do need senior life insurance, check out IDEAL Solutions Insurance Services Inc.
What Does Life Insurance Cover?
As we said, there are tons of life insurance benefits today when it comes to finances. Essentially, your family or beneficiaries can use the money on whatever they need it for.
It is often used to cover their daily expenses after your death. However, life insurance policies are also used for:
- College tuition
- Paying off outstanding debt
- Burial costs
Having a life insurance policy is a good way to tuck money away that your family will depend on after you’re gone.
What Does Life Insurance Not Cover?
There are only a few reasons why a life insurance policy wouldn’t cover you. Those reasons include:
- You were involved in criminal activity
- Your policy expired
- You committed life insurance fraud
- You did doing a hazardous hobby, life cliff diving
As long as you don’t fall into one of these categories, your life insurance policy will cover you and be a huge asset to your family.
Purchase Life Insurance Today
So, what does life insurance cover? Essentially, anything your family needs. If want to think ahead and take care of your family, it’s a good idea to purchase a life insurance policy. It’s never too early to prepare for the future.
For more financial resources, check out our other blogs.