What is life insurance used for?
It's never too early or too late to review your personal finances.
This can involve opportunities to save, reduce debt or even boost your economic protections. When it comes to the latter, it helps to look closely at your current insurance policies. Do you have enough insurance for your home? For your pet? For your next trip?
What about life insurance? The benefits of this insurance type are multiple and significant and yet many people still don't have a policy. "Half of American adults - representing 129 million Americans - say they don't have life insurance," a LIMRA study recently claimed.
Are you one of the millions who don't have life insurance? Not sure why you even need it? There are actually a wide array of things life insurance can be used for and it can be secured now, typically for an inexpensive cost.
If you're in the market for life insurance then start by getting a free price quote so you know exactly what to expect.
What is life insurance used for?
As mentioned, life insurance can be used for many things. Here are three primary ways a policy can be utilized.
As a safety net for lost income
Life insurance is arguably best known for providing a financial safety net for loved ones and beneficiaries in the event of the policyholder's death. If the insured is being relied upon to help pay rent, mortgage, education or child-rearing costs, then their death could be catastrophic. Fortunately, a life insurance policy in the right amount can help fill the gap a death causes by providing a lump sum of money.
Life insurance coverage amounts range drastically from tens of thousands of dollars to more than $1 million, so it can adequately cover - and even exceed - any financial needs that dependents may have. The amount you need varies depending on a series of personal factors, although many experts recommend a policy 10 times your annual salary.
You can easily see how much you could qualify for - and what it would cost - by getting a free estimate here.
As an inheritance for loved ones
Life insurance doesn't just need to fill an urgent need for economic support. It can also be purchased to serve as an inheritance for loved ones in the event of the policyholder's death. This is especially applicable to older people who may not be paying as many bills as they once were but still want to leave something for their relatives.
And unlike other forms of savings, a life insurance inheritance won't be subjected to income taxes or other fees. So, if you have a $1 million life insurance policy, that's what your beneficiaries will receive. There will also be a simplified process to obtain the money versus other forms of savings or home equity.
As a cash alternative to use while alive
Life insurance is often thought of as something beneficiaries can use once the insured has died. But, depending on the policy type, it can actually be used as a cash alternative while alive. Whole life insurance policies, in particular, provide an appealing cash reserve that can be accessed to pay debt, make household repairs or do anything else the insured wants to use it for.
Just understand that whole life insurance policies (largely because of this benefit) typically cost more each month than a term life insurance plan would. Also, even though these policy types allow for cash access it won't be immediate. It takes time to build up the cash reserves and any amount withdrawn will be deducted from the ultimate payout figure.
Still, if you're looking for good reasons to get life insurance, a policy that can provide extra funds may be at the top of the list.
The bottom line
Life insurance can be used for many things, including protection for small business owners. The above list is not exhaustive. Primarily, however, it serves as a financial safety net, an inheritance for loved ones and a backup cash fund for the insured to use during their lifetime.
If you think these reasons sound beneficial for your personal financial situation then start by getting a free price quote today.
