Understanding Life Insurance: What is It, and What are the Benefits?

Understanding Life Insurance: What is It, and What are the Benefits?

• Life insurance is highly important and one of the most sought-after insurance plans, even today.
• There are various types of life insurance and they have varying prices per month that people must pay in to receive these benefits.
• Some offer lifetime benefits, such as tax advantages, and even cash value accumulated over time.
• Life insurance can be a great decision for people looking to protect their loved ones in the event of their passing.

Life insurance is one of the most common insurance plans people talk about today. However, even though it is popular and was signed after the Second World War, people still are unclear about life insurance and its benefits.

This article will examine what life insurance is, the different types available, and even the history and purpose of its existence. There will also be a discussion of the benefits and a few challenges people encounter when purchasing life insurance for themselves.

Even for the newest individual, this article will provide enough detail for people to see the program’s value and potentially see a purpose in getting a policy for themselves.

What is Life Insurance?

Life insurance is exactly as it says: it is insurance for one’s life. Whole life insurance, also known as traditional life insurance, provides a permanent death benefit for the insured’s life to the family members after their passing.

There is also the potential for life insurance to accumulate cash value. Still, it does take a significant amount of time to reach a point when this cash value is of any importance to the remaining family.

There are also several other types of life insurance, including universal life, indexed universal life, and variable universal life insurance. Term life insurance is another phrase that people might hear, and this typically refers to a shorter period, only up to 40 years, when the individual is insured.

With almost every life insurance policy available, money can be drawn or borrowed from overtime without penalty, which is another significant reason why people consider life insurance a beneficial opportunity for themselves or their loved ones.

The History and Purpose of Life Insurance

What is fascinating that many people are unaware of is the massive surge of life insurance policies, specifically after the Second World War. From the mid-1940s until the 1960s, people invested in life insurance policies left and right.

It was one of the most popular purchases for families in America, specifically to learn how to handle war tragedies and be more prepared for the loss of the potential breadwinner, as many families experienced this phenomenon following and during the war.

As found during this time, life insurance had one sole purpose: to ultimately support the family if the breadwinner were to die, knowing full well that this policy would protect the family in events of a significant tragedy. In addition, it would change the trajectory of any family and give people further reason and opportunity to continue the life they once lived, even without their loved ones beside them.

How Much Does Life Insurance Cost?

Typically, life insurance varies in its costs. Still, according to specific life insurance, people can expect the following prices if they want to purchase a life insurance policy.

• Whole Life: $360 per month
• Universal Life: $173 per month
• Term Life Insurance for 20 years: $19 per month
• Term Life Insurance for 30 years: $30 per month

Typically speaking, life insurance is more costly with more benefits, which means that whole life insurance will be the most expensive due to the varied uses of such a policy. However, term life insurance still has notable benefits that help people, even though it is for a shorter time and potentially not as expansive in its terms and conditions.

The Benefits and Challenges of Life Insurance

Life insurance is a viable option for those looking to become as protected as possible, and term insurance, even at the very least, would be a great idea. However, there are both benefits and challenges to purchasing this policy. Here are some of the most common that researchers have found.

The Benefits of Life Insurance

Life insurance has many benefits, and many people enjoy having those accessible throughout their lives, especially as they grow families and expand their net worth.

Guaranteed Death Benefits

One of the most common benefits for most life insurance policies is that a guaranteed death benefit means the person will have their entire life protected. In addition, there will be a payout upon the person’s death, meaning that the family will be well taken care of even if the breadwinner disappears.

Cash Value Borrowing

There is also the benefit of cash value being accessible for borrowing during the person’s lifetime. So, for example, if somebody is going through a rough period, they can borrow from what they have already invested into the policy and pay it back at a convenient time in the future.

Protect Benefits from Creditors

Unlike other policies, life insurance is also highly protected from creditors, which means that no matter what happens, people will be protected from claims from creditors if they have these policies as their insurance.

Tax Advantages

There are also significant tax benefits associated with life insurance, some of which allow for cash value growth and loans that can be held against the policy. This makes for easier investing and accumulating net worth and cash value over time.

The Challenges of Life Insurance

Despite the vast benefits, there are some challenges to life insurance. Here are the most common that people encounter.

Higher Monthly Payments

Some people cannot afford whole-life insurance, especially when it can be as low as $300 but as high as $1000 per month. So, this is not always an optimal plan for people, although there are many benefits.

Less Flexibility with Premiums

Unfortunately, not all insurance plans have the same flexibility as others. For example, life insurance plans typically have significantly less flexibility than other plans regarding their premium offerings.

Cash Value Grows Slowly

Another major challenge is that the cash value grows slowly, not all at once. This means that people must invest for a more extended period, which is not always feasible.

Cost Increases with Age

Did you know that the earlier you buy into life insurance, the cheaper it will be? People often discover this when they purchase life insurance in their 40s or 50s. So, for the young individuals reading this below 30, now is the time to get in.

Is Life Insurance for You?

The truth is that life insurance is for everybody, but it’s about figuring out if it’s the right financial decision for you at this current time. If you’re looking for optimal life insurance plans, there are many available, and you would benefit from investing early to save money and protect your family for the future.

For more information about all things finance, feel free to check back in and read more about life insurance, other insurance policies, and other financial tips to get yourself on the right path to financial health.