Life insurance is important if you have people who are dependent on you financially. If you were to die unexpectedly then your salary would no longer be available to cover regular household expenses such as ‘’ mortgage payments ‘’, and utility bills, and your family would suffer financial hardship as a result. It is designed to cover these expenses in your absence, and to ease the financial burden experienced by your family at what would already be a very difficult time.
If you are a spouse or the parent of dependent children. But you may also require life insurance if you are someone’s ex-spouse, life partner, a child of dependent parents, the sibling of a dependent adult, an employee, an employer or a business partner.
These roles belong to ‘’the insurer’’, ‘’ the owner ’’, ‘’ the insured’’ and ‘’the beneficiary’’. The insurer is the insurance company, responsible for paying out claims in the case of a death. The owner of the policy is responsible for premium payments to the insurance company. The insured is the person upon whose life the policy is based. The beneficiary is the person, trust or other entity due to receive the insurance claim—or death benefit—in the case of the insured’s passing.
While some policies have an investment feature that can offer a degree of ‘’ tax privilege ‘’, insurance is rarely an optimal investment. There’s usually a better, more efficient tool for the financial task you’re trying to accomplish.
With term life means that you may very well pay premiums for decades and “get nothing out of it.” But that’s good news, because it means you’re winning at the game of life.Permanent life insurance includes this same probability-of-death calculus, but also includes a savings mechanism. This mechanism, which is often referred to as “cash value,” is designed to help the policy exist into perpetuity.
If you have a policy that isn’t appropriate for you—or you simply no longer need it—it’s important to proceed carefully. First, if you realize that you have overpaid for a policy that doesn’t meet your needs, but you still need it, don’t cancel the wrong policy until the right policy is in place. You can do so by requesting an “in-force illustration” and a “cost basis report” from your ‘’ agent’’.