You may have heard the saying, “life insurance is a contract with yourself.” That’s because it’s more than just an investment. It’s a promise to your friends and family that they will be taken care of if something happens to you.
Also, contrary to popular belief, life insurance isn’t just for people who are married or have children. It can also be useful for single people who are financially responsible for others.
What Is Life Insurance?
Life insurance is a type of financial product that pays out a lump sum upon your death. The money is usually paid to your beneficiaries, who can use it for any purpose. As you might expect, the more expensive policies have more benefits.
There are various types of life insurance plans available, with varying degrees of coverage. Some examples include term life insurance, whole-life insurance, and universal life insurance. Each has specific characteristics and pros and cons.
What Does Life Insurance Cover?
A life insurance plan covers you, the policy buyer. The purpose of a life insurance plan, regardless of the type you buy, is essentially to protect your loved ones financially if you die prematurely. Your insurer will pay out a lump sum once you’ve passed away. This money may be used in order to replace lost income or help cover funeral costs or other expenses associated with losing someone close to them. It’s also meant to help ease the burden on your loved ones’ finances, so they don’t have to worry about paying off debt or making ends meet financially after losing one of their primary providers.
Why Do I Need Life Insurance?
One of the most common reasons people choose to purchase life insurance is because they have dependents who rely on them financially — whether it’s because of their salary or other monetary contributions.
For example, if you’re married and make $60,000 per year at work, your family will have to do without that $60,000 should something untimely happen to you. That’s a substantial amount of money that could affect your family’s way of life.
Some people also buy life insurance plans so they can leave an inheritance behind for their loved ones or so a contribution can be made to a charity of their choice.
