Shawn Bradley 
When your income is your main source of funding, life insurance can be an essential way to ensure that you are taken care of after you die. Life insurance is often separated into two categories: term life insurance and permanent life insurance. Term life coverage only lasts for a certain amount of time, such as ten years, and the beneficiary is typically the person who pays for the plan in full. Permanent coverage, on the other hand, builds up a cash value that can be passed on to beneficiaries when you die; it also provides protection for children or dependents who may not have had a chance to save any money for themselves before now.
While you can purchase permanent life insurance by filling out a form and paying a one-time fee, term life coverage is usually included in your current policy. Some policies pay a special lump-sum benefit that builds your cash value over time; others may require you to start paying premiums after a certain amount of time has passed since the purchase.
Though the functions of each cover differ, some key benefits are the same for both. When purchasing term life insurance plans make sure that you are aware of what features will be most helpful to you. Your agent or insurance company can help guide you toward coverage that fits your personal financial situation and goals.
1. Compound Interest
Compound interest is a powerful benefit of life insurance. When you take out a term life insurance policy, you get a lump sum benefit that builds up over time. When you pay premiums, the money will be deposited into your account, and the sum will be credited toward your future benefits.
If you have ever wondered how to earn extra money in the bank, this is an easy place to start! Of course, it takes time for this amount to build up – just like other investments – but when it’s added up over several years, you may have enough protection from death to make sure that your family can continue doing what they do as long as they want.
2. 100% Death Benefit
Typically, term life insurance pays out 100% of your policy amount should you die, with some exceptions. For example, the state where you live may have a “law of claims,” which states that no more than a certain amount will be paid out even though the beneficiary may otherwise qualify for more. Other states have stricter regulations and laws on this issue.
Term life insurance can also provide a full payout in other situations as well. If you are found guilty of fraud (for example, committing fraud against a company or securities violation), there can be penalties assessed against your estate that would also affect your beneficiary’s death benefit. In some cases, a part of the life insurance policy may have to be paid back if you commit suicide or intentionally cause your own death.
3. Cash in Case of Emergencies
You never know when you might need an unexpected cash infusion, and term life insurance can provide that help. If the death benefit is large enough, the cash value will be better than a savings account or money market fund. The amount you pay into this plan has already earned interest by the time you die, providing an additional layer of protection and an extra boost for your family if they ever need it in an emergency situation.
4. Survivorship Feature
If you are the sole beneficiary of a life insurance policy, this may be beneficial to you. The purpose of this feature is to make sure that your beneficiary receives the full amount for the duration of the policy.
If a child or other family member becomes disabled, changes their priorities, or chooses not to live as frugally as they had been, they may need money to survive financially and maintain their lifestyle. With a survivorship feature, they will receive all of the remaining money if you die at any time after purchase; if your beneficiary dies before you do, then there is no benefit under this plan.
5. Death Benefit Extension
In some cases, the amount offered by term life insurance may be less than other plans. For a person who is in poor health or has a medical condition, this can be an issue. If you need more coverage, some plans can provide additional protection after you die; these benefits allow your beneficiaries to receive the death benefit as long as they continue to pay premiums on time.
This is an excellent way to help out family members or dependents who were not fully prepared for your death and do not have the funds on their own to cover all expenses.
Conclusion
No one likes to think about life insurance, but it’s an essential step in planning for the future. People who have already purchased a policy do so because they know that someday they may need the funds and want to be well protected.
If you haven’t yet made arrangements for your family, consider getting life insurance today. You may find this a simple way to provide your family with financial help when they need it most.
