Even for a modern family, it is very common to have one or two individuals as sole breadwinners. Other members are wither minors or retired seniors fully depend on the income of the breadwinner. The situation is indeed changing and families are getting increasingly smarter. But, there are still many families who simply cannot manage to maintain their current lifestyle after the death of the sole breadwinner.
In such a situation, the surviving dependents either have to lower their standard of living or look for ways to earn some money. None of the above-mentioned options are desirable. Kids cannot afford to abandon their education midway and, for a senior citizen, it is challenging to get a well-paying job. A life insurance policy is meant to prevent such a situation from happening in the future.
What is Life Insurance?
There are many interpretations of a life insurance policy as there are several models available in the market. In general, a life insurance policy is a legal contract between an insurance policyholder and the insurance company, where the company promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of a policyholder. In some cases, a terminal illness or a medical emergency can also be a reason to claim the benefits(even while the policyholder is alive).
How does Life Insurance work?
There are two main types of life insurance policies: 1) Term insurance and 2) Permanent insurance. Before purchasing life insurance, the insurance agent will ask for a few questions. And one of the most important questions is: How long do you need the insurance for? Needless to say, the answer varies from person to person.
Some of the factors considered before deciding the type of insurance are: the size of your family, your monthly income, your age, the age of the youngest person in your family, and many more. Once you have this information in your hand, you can easily decide whether a term insurance will be the best solution or a permanent insurance is what you really need.
What does a Term Life Insurance policy cover?
1) End-of-life expenses
3) Childcare expenses
4) College tuition
5) Monthly bills and General expenses
Do I need Life Insurance? How much should I need?
There is no one answer to this question. Generally speaking, if you are someone who has a spouse, kids, or elderly member in your family, then you should definitely think of purchasing a life insurance policy.
If the unexpected is to happen and you are no more tomorrow, your family members will have the assurance they need to live a comfortable and worry-free life. You don’t want your family members to suffer a financial blow after you pass away.
Secondly, only a qualified life insurance agent can determine how much cash your family will need after your death. Before offering you a life insurance plan, they perform a procedure known as “Financial Needs Analysis”. This is where the agent will access your current financial state and also determine your family’s future financial needs.