Life insurance basically works as a contract between a policyholder and an insurance company where the insurance company agrees to pay a certain amount of money (the death benefit) to a designated beneficiary in exchange for periodic payments (the premium). The policyholder pays the premium either in a lump sum or in installments. If the policyholder dies during the policy’s term, the death benefit will be paid to the beneficiary.
Bill Schantz of Mid Atlantic Financial LLC will tell you everything you need to know about how life insurance works in a comprehensive guide.
Benefits of Investing in Life Insurance
There are many benefits of investing in life insurance. The most obvious benefit is the death benefit, which can provide financial security for your loved ones in the event of your death. But life insurance can also be used as an investment tool. The cash value of a life insurance policy grows tax-deferred, which means you can use it to save for retirement or other long-term goals.
Another benefit of life insurance is that it can help you meet your financial obligations in the event of your death. If you have a family, your life insurance policy can be used to pay off your mortgage, cover your children’s education costs, or provide income for your spouse.
Finally, life insurance can give you peace of mind. Knowing that you have a life insurance policy can help you worry less about what would happen to your loved ones if you died.
Types of Life Insurance Policies
There are two main types of life insurance policies. Bill Schantz will explain what they are and how they will benefit you.
Term Life Insurance
Term life insurance is the most basic and probably the most common one. It gives coverage for a specific period of time, typically 10-30 years. In case of your death, while the policy is active, your beneficiaries will be given the death benefit.
Whole Life Insurance
Whole life insurance is a more complex type of life insurance that offers coverage for your whole life. Whole life insurance policies have two components: the death benefit and the cash value. The death benefit is the same as a term life policy – Your beneficiaries will receive a lump sum if you die.
The cash value is an investment component that grows over time, tax-deferred. You can use the cash value to pay premiums or take out loans (although there are taxes and fees associated with doing so).
Which Type of Policy Is Best for You?
The type of life insurance policy that is right for you depends on your individual goals and needs. If you need basic coverage and don’t need the cash value component, a term life policy may be right for you. If, on the other hand, you need lifetime coverage and like the idea of having a cash value component that you can borrow against, a whole life policy may be the right choice.
No matter which type of policy you choose, be sure to shop around and compare rates from different companies before buying a policy. Life insurance is a big decision – make sure you are getting the best coverage for your needs.
Conclusion
Life insurance is an important decision that should not be taken lightly. There are many different types of life insurance policies available, so it’s important to choose the one that best fits your needs. Bill Schantz recommends comparing rates from different companies before buying a policy. Always remember that life insurance is not just for death – it can also be used as an investment tool to help you save for retirement or other long-term goals.