Unfortunately, life seldom goes exactly according to plan, so it’s best to prepare your family for the worst. By taking out life insurance policies for your family, you can ensure your loved ones have financial security. And you can gain peace of mind.
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Types of Life Insurance Policies
The two main types of life insurance policies are term life insurance and whole life insurance. The former lasts for a designated period of time, whereas the latter will never expire, as long as you pay your premiums. A whole life insurance policy also builds cash value over time, but it usually costs more than a term life insurance plan. Additionally, when you’re older a whole life insurance policy can be easily sold to a third party for cash through a life settlement.
Short term insurance is another type of life insurance policy that can be beneficial at certain times. The duration of short-term-policies can vary, but most will cover you up to a year. If you should die in that period, your beneficiaries receive a predetermined amount of money. Most people purchase short-term life insurance when they have coverage gaps. For instance, if you get insurance via your employer and leave your job, you could have a gap before finding a new job. Short-term insurance can also be used for additional coverage that is not contained in your term or whole life policies.
Coverage for You and Your Spouse
If you share your household finances with your spouse, if he or she should unexpectedly die without life insurance, you will be struggling with financial burdens on top of your grief. You can opt for individual life insurance policies or a joint policy. If you get separate life insurance plans, each one is likely to differ from the other, which could affect the rate your spouse receives. Having a joint life insurance policy makes things much more straightforward. Joint plans are usually permanent life insurance policies, and there are two main types:
- First-to-die policies, which pay the death benefit after your spouse dies.
- Second-to-die policies, which pay the death benefit after the second spouse dies. This option can be useful for inheritance planning or paying estate taxes.
Coverage for Your Children
Most people do not need to purchase life insurance for their children. However, there can be times when it makes sense to do so. For instance, if your child is likely to develop a medical condition, it will be difficult to purchase coverage later on. So, getting life insurance for your child early on, in that scenario, protects his or her future insurability. Life insurance policies can also be used for that “what if” scenario. By paying premiums, you can receive a death benefit for things like funeral expenses. You have two options for buying life insurance for kids. Firstly, you can buy a child rider on your own term insurance plan, or you can purchase a specific child life insurance policy.
Coverage for Your Parents
You cannot actually purchase life insurance policies for your parents. However, you can encourage your parents to take out policies of their own. And you could pay the premiums for them. Also, once your parents own a policy, they can name you as a beneficiary.
These different life insurance policies can help financially prepare your family for the worst Another way to prepare your family for the worst is to document the policy numbers, contact information, and other important insurance information to have on hand if the need ever arises.
Featured Image by Gerd Altmann from Pixabay
