You can use your life insurance policy to leave behind a legacy or ensure that your loved ones have financial resources after you pass away. Let's take a closer look at the ways that life insurance can protect your beneficiaries.
Term Versus Whole Life Insurance
Term life insurance covers you for a certain length of time. When the policy ends, you no longer have life insurance coverage. You would have to get a new policy to maintain the protection. With whole life coverage, on the other hand, the policy lasts indefinitely. It also often doubles as an investment plan.
If you need insurance for a shorter period, say for 10 years for your youngest child to finish college, term life coverage generally provides the most cost-effective option. If you need insurance for 20 years or more, whole life might be more cost-effective.
How Life Insurance Safeguards Your Beneficiaries
Beneficiaries are people you name on your life insurance policy who receive the life insurance payout upon your death. The payout can essentially set your family up to maintain their standard of living in case you die without warning.
Here are just some of the ways your beneficiaries can use your life insurance to support themselves:
· Cover college tuition
· Pay off debts
· Pay off the mortgage on a home
· Create a safety net
Beyond family members, you can choose from a number of options when it comes to premiums and coverage amounts. For example, if you have a favorite charity that you want to leave your life insurance money to, you can name the organization as the beneficiary of your policy.
Life Insurance for Each Stage of Your Life
Choosing a life insurance policy remains an individual choice. Your stage of life can influence this decision. For example, term life insurance could be more cost-effective for single adults. Many young families choose whole life insurance to ensure their children and spouse receive coverage for many years to come.
Life Insurance that Protects Your Business Partner
Business partners often take out life insurance policies that provide funds to buy out the surviving business partner. For example, you and your business partner may want the option to sell or buy out each other's share of the business if one of you dies unexpectedly. Getting life insurance that names each other as the beneficiary provides the funds to do that without affecting loved ones covered under a separate policy.
Talk to your life insurance agent to discuss what options work best for you. They can help you better understand your choices.