What is Life Insurance? – Explained
What is Life Insurance – Explained
Life Insurance is an investment that we often hear about, if you do not already have a Life Insurance Policy then there is a 95% chance that someone you know already does. Often times you might even have some form of a life insurance policy already without knowing what it really is.
As life insurance is simply insurance that pays out a certain amount of money, in most cases only after your own death or after a certain period of time.
At the end of the day, the easiest way to describe life insurance would be to classify it as a financial investment from which we will never directly benefit from. But it is a long term financial investment, from which the people close to us, or whomever you select as your beneficiaries, will be able to benefit from once we are no longer there.
More importantly, a life insurance policy has the unique ability to provide financial security for those important to us after we pass. Although the uses and benefits of policies differ depending on your provider, the terms of the specific policy, and even your own personal profile, the following are a list of ways a life insurance policy can be utilized:
1. Burial Expenses
Although contrary to popular belief our costs and expenses don’t even end after we pass, costs such as the expenses associated with burial or cremation can often be a heavy burden on the friends and family we leave behind.
We never know when we may take our last breath, often people end up leaving their loved ones burdened with debt. The financial security provided by a life insurance policy can be utilized to ensure this doesn’t happen.
3. College Tuition
Imagine a cruel world where you pass before your own kids enter college or are currently going through college. In such a situation they can use your life insurance policy to ensure that their education is not interrupted.
At the end of the day, life insurance is a financial contract between yourself and whoever your provider is, that swears to pay a specified amount of money in exchange for what you’ll be paying in yearly fees (otherwise known as premium payments).
In addition, it is also important to remember that there are two main types of life insurance, permanent and temporary, both of which we have covered in the following article:
In conclusion, life insurance is a financial tool that allows us to provide almost everlasting financial security for our loved ones, making it one of the most important investments that you will ever make.