The amount of the death benefit depends on how much coverage you choose to buy. In return, the insurance company will pay a death benefit to your beneficiary if you die while the policy is in force. You agree to pay a premium-usually regular payments over time-to keep the policy active. Be sure to carefully evaluate what you want out of a life insurance plan to choose the ideal option for you.Life insurance is a contract between you and a life insurance company. permanent life insurance, the best form of coverage will depend on your specific needs. Mutual insurers may offer dividends on permanent life insurance, another feature not included in term life insurance. You can also build cash value in a savings account over time with permanent life insurance, which can also be invested in the market if you choose a variable or indexed universal life policy. If you are young and healthy when you buy it, permanent life insurance is the cheapest, and rates will never increase. Though permanent life insurance is more expensive, it provides lifetime coverage. While term and permanent life insurance have many similarities, there are some stark differences between these two coverage options.įor example, term life insurance offers level, relatively affordable premiums but has no investment or savings vehicle attached like permanent life insurance. The benefit can then be used for income replacement or to pay for childcare and other expenses. Buying term life insurance for the stay-at-home parent means the working parent can choose to continue working or stay at home with the kids if they choose. Stay-at-home parents provide enormous benefits to their families, allowing the other parent to work and earn income. Proceeds can also be used to replace income or provide current and future financial support for remaining family members. The designated beneficiary will use the death benefit proceeds to pay off those debts - like student loans or a mortgage - rather than have to pay them out of pocket or forfeit the property. People with significant debts can use term life insurance to pay them off upon their death. The proceeds can also be used to pay for everyday expenses, current and future childcare and education costs. The remaining parent can use the death benefit as income replacement, allowing them to stay at home with their children instead of having to go to work right away. Losing a sole source of income can be detrimental to a family, which is why term life insurance can be vital in these situations. In this instance, the owner pays for the policy, and the company is the beneficiary, receiving the death benefit if the key employee dies. Owners with valuable employees can also take out term life insurance on them, often called key man insurance. The details are typically outlined in a buy-sell agreement contract, which is especially important if ownership or shares in the company are to be transferred to another party. Term life insurance proceeds can be used for many purposes, including replacing income, paying off outstanding debts like a mortgage, car and student loans, and covering future financial needs like childcare and education costs.īusiness owners can use term life insurance proceeds to pay off debts, expenses and outstanding taxes. The younger and healthier you are, the better your rates will be. Young couples may not think they need life insurance, but this is the best time to buy term life coverage.
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