How Life Insurance Is A Smart Investment

Do you have a life insurance policy? Many people are hesitant to get life insurance because they don’t want to think about their mortality. They think the policies are too expensive. There are too many exclusions, and the individual may not be interested because it doesn’t benefit them in their lifetime. Let’s take a look at how life insurance can be a smart investment in the individual’s lifetime and after their departure from this world.

Understanding the Role of Life Insurance

Most life insurance policies are designed to pay out upon the policyholder’s death. The lump sum payout can then be used by the individual’s heirs to pay any final expenses, including medical bills and funeral and burial costs. If you’re the breadwinner in your family, you might choose to take out a policy with limits that are higher so that your heirs don’t experience financial hardship in the event of your death.

Types of Life Insurance Policies

Most people are familiar with the two main types of life insurance policies, including term life insurance and whole life insurance. However, there are other types of life insurance policies.

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  Term Life Insurance – Term life insurance is valid for a specific number of years, usually 20 to 30. During the term the life insurance policy is active, the policyholder makes the monthly payments. If the individual dies during the term, the life insurance policy pays out to the beneficiaries. If the individual is still alive at the end of the term, they may be able to renew it on a year-to-year basis. If it cannot be renewed, the policy will expire without paying any money to the beneficiaries.

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  Whole Life Insurance – Whole life insurance is good for the individual’s entire life, provided that they make all of their monthly payments. This type of insurance also typically comes with a cash component, meaning that a certain part of the premiums are deposited into a type of savings account that earns interest. The savings component of the life insurance policy does not affect the death benefit payout. However, if the savings component and the death benefit payout equal each other, the policy will pay the cash value, and the policy will be terminated.

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  Universal Life Insurance – Universal life insurance policies are similar to whole life policies because they also last the lifetime of the policyholder, provided the premiums are paid, and they have a cash value component. However, universal life insurance policies offer greater flexibility than whole-life policies because the policyholder can change the amount of the death benefit and adjust the premiums.

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  Variable Life Insurance – Variable life insurance policies have a fixed death benefit and a variable cash value component. The cash portion of the policy can be invested, which means the cash value will fluctuate based on how well the investments perform.

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  Final Expense Life Insurance – Final expense life insurance is often chosen by older individuals. These policies help pay for the policyholder's final expenses, like their last medical bills and funeral and burial expenses. Some policies also offer a cash value option that grows over time.

Why Everyone Should Consider Getting a Life Insurance Policy

If you’re looking for a life insurance policy that benefits you as well as your beneficiaries, you could choose to purchase a whole life, universal life or variable life insurance policy. These policies have cash components to them that earn interest and can be invested. Some life insurance policies, like whole life, may allow you to take out loans against the cash value portion of the policy.

Everyone, regardless of their age, should consider getting a life insurance policy so that their beneficiaries aren't financially burdened with their final expenses. If you're not sure which policy would best benefit your family, an agent can help answer your questions so that you can choose the best option for your circumstances.