Understanding Life Insurance

What is life insurance?

Life insurance is a financial protection plan that provides a payout to designated beneficiaries when the policyholder passes away. It helps ensure financial security for loved ones by covering expenses such as funeral costs, outstanding debts, mortgage payments, and future living expenses.

How does life insurance work?

A policyholder pays regular premiums to an insurance company in exchange for a death benefit that is paid out to beneficiaries upon their passing. The amount and duration of coverage depend on the type of policy chosen.

Types of Life Insurance

• Term Life Insurance – Provides coverage for a set period (e.g., 10, 20, or 30 years) and pays a benefit if the policyholder passes away during that time.
• Whole Life Insurance – Offers lifetime coverage with a guaranteed death benefit and builds cash value over time.
• Universal Life Insurance – A flexible permanent policy that allows adjustments to premiums and coverage while accumulating cash value.
• Final Expense Insurance – Designed to cover end-of-life expenses such as funeral costs and medical bills.

Who needs life insurance?

Life insurance is beneficial for:

• Parents and guardians who want to ensure financial stability for their children.
• Spouses or partners who rely on combined income.
• Business owners needing financial protection for their company.
• Individuals with outstanding debts such as mortgages or loans.
• Anyone wanting to leave a financial legacy or cover final expenses.

Life insurance provides peace of mind, ensuring that loved ones are financially protected in the event of an unexpected loss.

When do most people purchase life insurance?

People typically purchase life insurance at key life stages when financial responsibilities increase. Some of the most common times to buy life insurance include:

Getting Married or Starting a Partnership – Couples often purchase life insurance to protect each other financially in case of an unexpected loss.

Having Children – New parents buy life insurance to ensure their children's financial security, covering future expenses such as education and daily living costs.

Buying a Home – Homeowners may get life insurance to cover mortgage payments, ensuring their family can keep the home if something happens to them.

Starting a Business – Entrepreneurs often purchase policies to protect their business, cover debts, and provide stability for partners or employees.

Getting Older or Planning for Retirement – Some individuals buy or update life insurance policies later in life to cover final expenses, leave an inheritance, or supplement retirement income.

Experiencing a Major Health Change – People may buy life insurance after a health scare or diagnosis to secure coverage while they are still eligible.

Receiving a Promotion or Salary Increase – As income grows, individuals may increase their coverage to match their higher financial responsibilities.

While younger, healthier individuals typically get better rates, life insurance can be valuable at any stage of life to provide financial peace of mind for loved ones.