Unfortunately, over 2,800,000 people die in the U.S. every year. While the cause of death varies from terminal cancer to car accidents, there is something that many people that die have in common- not having life insurance. As you can imagine, that can leave a huge financial burden on the family.
But, how does life insurance work? That’s the question we’ll answer today. Additionally, we’ll cover different types of life insurance policies you can get for yourself.
What Is Life Insurance?
Before you can understand how it works, you should first understand what life insurance is. Life insurance is a legal contract between an insurance agency and the policy owner. Of course, some private family banking corporations now issue life insurances, which can be something you can consider if you can’t find a decent life insurance agency.
How Does Life Insurance Work?
Unlike many other insurances, you’ll need to pay an annual premium when you get life insurance. The contract guarantees that the insurance agency will pay out a certain sum of money to a beneficiary (or beneficiaries) if the policy owner would die.
But, of course, the payment is only made while that contract is valid. If it’s not valid, your family or other beneficiaries will not receive the specified amount of money.
The amount someone gets varies greatly since there are many types of life insurance. Let’s break down the most common ones.
Types of Life Insurance Policies
As mentioned before, how much money your family or beneficiary gets will depend on the type of life insurance you get. And, some of the best life insurance policies can cover your family financially for a long time. So let’s discuss them now.
Term Life Insurance
A term life insurance only provides coverage for a set amount of time. As with any life insurances, the beneficiary will receive money at the time of your death. Here are the different term life insurances:
- Decreasing term insurance
- Convertible term insurance
- Renewable term insurance
The amount of time a term life insurance varies from one to thirty years. As a result, term life insurance is a lot cheaper than the other types of life insurance policies.
Permanent Life Insurance
This type of life insurance can be a lot more expensive for the average person, so it is only for those who already have a strong financial foundation. Here are the different permanent life insurances:
- Whole life insurance
- Universal life insurance
- Variable life insurance
A notable difference between permanent and term life insurance is that you can also include a final expense policy, which covers your funeral costs with permanent life insurance.
Understand Life Insurance
Hopefully, by now, you can answer the questions: What does life insurance cover, and how does life insurance work? And while buying life insurance isn’t an easy step to take, it’ll ensure that your family lives a financially stable life. So, don’t wait any longer, and get life insurance today.
What life insurance policy do you think is best? Let us know in the comment section. And if you found this post helpful, be sure to check out our other articles since we are confident you’ll find them interesting as well!