Life Insurance

How to Choose a Life Insurance Policy

Choosing a life insurance policy can be overwhelming because it forces us to think about something we really don’t want to happen: the effects on our family or loved ones once we die. Then, there are all the options and the added cost. 40% of Americans do not have any form of life insurance despite the fact that in 35% of American households, if the primary wage earner died, they would feel the financial impact within one month. Here are the basics you need to know about how to choose a life insurance policy without breaking the bank so you can get the protection you need

What Is Life Insurance

Life insurance is a contract between an insurance company and yourself in which you agree to pay a premium in return for the insurance company’s commitment to paying a set amount of money to a person(s) of your choice upon your death. 

  • The money the insurance company agrees to pay is known as the death benefit.
  • The person who receives the money is the beneficiary.

7 Reasons to Get Life Insurance

The main reason to get life insurance is to secure a lifestyle or wealth for your family (or a chosen beneficiary) after you die. There are other advantages as well. Here are the most common reasons to get life insurance:

  1. To pay for funeral expenses, unpaid medical bills, student debt, or other debts remaining after death so that your family does not need to assume the burden.
  2. To leave money behind to your family or spouse so that they can maintain the lifestyle they were accustomed to.
  3. To leave an inheritance, donate funds to a charitable cause, provide funds for college, or pay off a mortgage.
  4. To build wealth, as can be seen when using life insurance with investment options.
  5. To transfer wealth and take advantage of various tax breaks for the beneficiary when receiving the death benefit. Life insurance can provide many tax-free advantages.
  6. To pay for estate taxes so your family does not have to use the inheritance to cover these taxes.
  7. To secure a mortgage or other debt when the lender requires it

Getting a home loan

The basics of getting a home loan are fairly simple – you borrow a set amount of money and pay it back over a certain length of time at a specifiedinterest rate. The details, though, can get tricky.