Life insurance is a form of insurance policy that insurance providers offer. The insurer pays out a fixed amount after the policyholder dies in exchange for monthly premiums. This amount goes to the beneficiaries that you, the policyholder, name — usually including children, spouses, or other family members. Life insurance policies can serve as a financial cushion for the dependents of policyholders.
Life Insurance Coverage
If you are close to retirement, you may want to consider a life insurance policy if you do not already have one. Life insurance benefits can assist your loved ones in a way that provides them with a legacy, or in case of unexpected expenses that may occur later in your life such as critical illness, prolonged hospital stays, or accidental injury. So in short, insurance policies provide legacies that are taken care of, extra financial security to cover outstanding debt or pay benefits for funeral and end-of-life expenses.
Life insurance benefits can take over when Medicare benefits don’t offer enough coverage. Although Medicare insurance and a general life insurance policy can work in close association with each other, they should not be confused with each other.
In life insurance policies there are terms such as the death benefit, premium, and cash value.
Death benefit – refers to the fixed amount the insurance company gives the beneficiaries in the event of the policyholder’s death. The policyholder must choose the death benefit amount based on the estimated quantity the beneficiaries need to cover their future needs. The insurance company will let you know if there’s an insurable interest and whether or not you qualify.
Premiums – refer to the monthly payments the policyholder must pay for insurance.
The premium cost is partly determined by how likely it is for the insurance company to pay the death benefit based on their life expectancy. Some factors influence life expectancies, such as age, gender, occupational hazards, and high-risk hobbies. The higher the death benefit amount, the higher amount the insured will pay.
Cash value – serves as a type of savings account that the insured can use while alive. The policyholder can also use it to pay the premiums or to purchase additional insurance.
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Types of Life Insurance
There are two primary types of life insurance, though some variations of the two life insurance types exist. The two types of life insurance policies are term life insurance and permanent life insurance.
Term life insurance is active for a limited period, such as 20 or 30 years. This type of insurance doesn’t accumulate cash value, and if the policyholder dies during the term period, the beneficiaries will get the death benefit from the insurance company.
If the policy expires, then the insured can choose to purchase a new one or reassess. Permanent life insurance is costlier than term life insurance. It also has features like cash value.
Permanent life insurance pays a death benefit if the insured dies at any point and also serves as an investment account. Permanent life insurance remains active until the policyholder’s death or if they stop paying the premium. Whole life insurance is a type of permanent life insurance.
What is the difference between Medicare and Life Insurance?
Medicare is a federal program that provides hospital and medical insurance for individuals who are eligible due to age or disability and is exclusively considered health insurance that covers some medically related expenses and does not cover life insurance premium costs.
Unlike life insurance coverage, Medicare does not offer benefit payments to relatives for the loss of life of the policyholder.
Health insurance policies can provide you with the option to use financial benefits during the course of your lifetime. For example, there is an existing option of health insurance policies supplementing your Medicare coverage for large expenses such as long-term care costs. If you find yourself requiring care in a skilled nursing home facility at some point in your life, you might need extra financial assistance that a life insurance policy can provide.
People confuse Medicare with life insurance due to the fact that although the Social Security Administration manages Medicare, your Medicare policy is not responsible for funeral cost coverage, or for a death benefit which is supposed to be taken care of by life insurance.
Who Needs Life Insurance?
Generally, if you have financial dependents such as a spouse, kids, or other relatives, you should consider purchasing a life insurance policy. For parents with minor children, a life insurance policy is a good choice as the death of one or both parents may result in financial difficulties for the children. Also, parents with adult children who need lifelong care should consider buying a life insurance policy to help meet the child’s needs.
Others who should consider getting life insurance include adults who own a property together, couples who are both pensioners, seniors with adult children, etc. The bottom line is, life insurance can provide financial support to your dependents after you pass away. Traditionally, young adults with families are considered to be the ones who buy health insurance so they can get coverage for years during which their families depend on them for financial support. This doesn’t mean health insurance is only a good choice for young families, but also for retirees who could benefit from them in different, but equally important ways.
In case you already have a life insurance policy, make sure to check it and make sure that it covers any of the future needs you think you might be having.
Contact Better Place Insurance Group
Have questions? Feeling overwhelmed? Reach out to Better Place Insurance Group in Lakeland, Florida, for more about insurance policies! We can help you find the right life insurance plan at the right price.