Life insurance is a type of policy designed to provide a death benefit to your selected beneficiaries after your death. The payout from a life insurance policy can be used in a number of ways, including:
|Replacing income||Life insurance can help replace your income for those who depend on it, making sure your loved ones are taken care of when you pass away.|
|Living expenses||The beneficiary can use the money to pay for bills, grocery, utility and childcare expenses, as well as other costs that may pop up.|
|Debt repayment||The death benefit can help your loved ones pay for mortgage payments, car loan costs, and other debts without worry.|
|College tuition||If you’re financially responsible for your child’s college tuition or education, you may want to factor those costs in when you purchase a life insurance policy.|
|End-of-life expenses||Life insurance can cover expenses such as funeral costs, the price of a casket and the expense of a reception.|
|Childcare||Life insurance policies can help cover the cost of childcare, daycare, after-school programs, nannies and other expenses.|
While life insurance is primarily used to provide financial support for your loved ones, life insurance with living benefits can provide options for you to use your life insurance coverage while you are still alive. There are different types of living benefits you can choose from, based on your needs. For example, many companies offer an accelerated death benefit rider, which provides you with access to a portion of your death benefit prior to your passing if you’ve been diagnosed with a terminal illness.
It’s easy to see life insurance as a practical purchase. After all, it’s helping your loved ones feel financially secure after your passing. But life insurance can go a step further. You could use your life insurance policy to leave a financial gift to your beneficiary, your children, an organization or a charity. If you choose to do this, just be sure you buy an appropriate amount of coverage. You’ll likely still want your loved ones to have enough of a payout to cover daily expenses, debts and the other costs mentioned here.
- The University of Toledo. What Is Life Insurance And What Are Its Features?
- State of New Hampshire Department of Administrative Services. Life Insurance Definition & Meaning
- USAA. How Does Life Insurance Work?
- Johns Hopkins University. What Is Life Insurance, And How Does It Work?
- UCOR. Life And General Insurance