While life insurance is not legally required, it is helpful to have, especially if you have dependents. Life insurance gives you peace of mind, knowing that your family or dependents will be paid out should anything happen to you.
Many people put off buying life insurance when they are young because they believe it’s expensive. But this is not the case, as there are plans available to suit every budget. If you need to learn more about life insurance, here’s everything you need to know.
Types of Life Insurance
Life insurance is a policy whereby you pay monthly premiums and when you die, your insurance provider will pay your named beneficiaries the death benefit. Your beneficiaries can be your spouse, children, or anyone you name, and the funds can be used to pay for your funeral, any debt you may have, or for their living expenses.
When looking for life insurance, there are two primary options:
1. Term Life Insurance
Term insurance is typically more affordable and flexible. The term is set to a number of years, like five, ten, or 20 years or however long you choose the period to be. Your insurance will cover you during the policy term.
When buying term life insurance, you need to consider when and for how long your dependents will rely on your income. Many people purchase term life insurance when they have young children because the latter will need the income until they are old enough to provide for themselves.
In this case, the policy term would be from when the child is born until they are grown, which could be between a 20-25 term.
2. Permanent Life Insurance
Permanent life insurance is less flexible, more expensive, and does not expire as long as you pay the monthly premiums. Unlike term life insurance, permanent life insurance grows in cash value, and you can withdraw from it while you are alive or use it as collateral to secure a loan.
A lot of people prefer this life insurance type to secure their children’s and family’s future. If you are a life insurance provider, you can life insurance leads from Netcare Marketplace and reach the right customers.
Pros and Cons of Life Insurance
Purchasing life insurance is a long-term financial commitment, regardless of the type you choose. So it’s important to understand the pros and cons.
Pros
● Financial protection for your dependents
The most significant benefit of life cover is that when you die, your dependents will receive either a lump sum or monthly installments to cover their living expenses and any debt you had.
● Affordable
Life insurance doesn’t have to be expensive. You can choose a policy that will fit into your budget.
● It can be an investment
If you buy permanent life insurance, it can be a type of investment as the funds grow.
Cons
● It can be expensive if you’re old or unhealthy
The best time to buy life insurance is when you’re young and healthy. Life insurance premiums become more costly as you become older or develop any severe medical conditions.
● Returns are low
While permanent life insurance policies are marketed as an investment vehicle as well as insurance, the returns are much lower. So it should not be the only way you save or invest.
What to Consider Before Buying Life Insurance
Since life insurance is a financial commitment that will impact your dependents, you must consider all factors carefully before deciding on a policy.
An important thing to think about is your age and health status. The earlier you buy life insurance, the better, as you’ll benefit from lower premiums when you’re young and healthy. If you choose permanent life insurance, buying it when you are younger gives the funds more time to grow, which increases the cash value.
The most common beneficiaries of a person’s life cover are their spouse and children, but also take into account anyone else who may depend on you or who you would like to benefit from your policy.
For instance, if you own a business, you may want to include your employees, or if you donate to a charity, you may want them to be paid a portion. There may also be people you help on an ad-hoc basis, like parents or siblings, who can be included in the policy.
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