Many people are put off by the thought of purchasing life insurance. While it’s not pleasant to think about, life insurance can provide much-needed financial protection to your dependents if something unfortunate happens to you in the future.
What Is Life Insurance?
A life insurance policy provides coverage on the policyholder’s life. So, if the policyholder passes away, the insurance provider will offer a non-taxable payout to the beneficiary. There are two major types of life insurance policies – term insurance and whole life insurance. Term insurance offers coverage to policyholders for a specific number of years. Whole life insurance, on the other hand, lasts for as long as you live and also builds a cash value.
Why Do You Need Life Insurance?
Coverage against debt: If you own a business, a home, or have taken out a personal loan or auto loan, your family will likely need to repay these debts if you pass away. The coverage provided by a life insurance policy can help your family repay your debts.
Financially securing the lives of your children: In your absence, the policy payout will ensure that your kids have the financial means to live comfortable lives.
Can help your business survive: If you are in business with a partner, you and your partner should consider purchasing life insurance policies and name each other as beneficiaries. This will ensure that even if one of you happens to pass away, the other business partner has the necessary funds to buy out shares and carry on with the business.
To pay for end-of-life expenses: Funerals are quite expensive and can go up to $10,000. A life insurance policy will ensure that your family is able to pay for these expenses without any hassles.
How Much Life Insurance Should You Buy?
The coverage you should opt for will vary based on how much you make annually, your age, how many dependents you have, and what you can afford to pay. That said, it’s best to opt for coverage between 7 and 10 times your annual income to be on the safer side.
Based on where you reside, you may be able to buy a life insurance policy through an agent or online. Regardless of which type of policy you choose to purchase, you should compare quotes and coverage options laid out by different insurance providers.