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Life Insurance Explained: What to Know and How to Get Started

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May 27, 2021

Life Insurance Explained: What to Know and How to Get Started

An old joke claims that no one really needs life insurance because everybody will die anyway. While this is technically true, it leaves out the fact that life insurance is not made for the policyholders but to help with the financial burdens of their dependents.

When you die, the income you generated suddenly disappears. This means that if you have a spouse, children, or anyone else who depends on you financially, they will be left without this support. Life insurance offers peace of mind for anybody raising a family. Unfortunately, it's something many people don't think about until it's too late.

According to the Life Insurance Marketing and Research Association (LIMRA), in 2020, 54% of Americans had life insurance. If you are not among them, you may want to reconsider this decision, so you can know that your loved ones will be cared for in the worst of scenarios.

What is Life Insurance?

Historically, life insurance was created as a tool to guarantee assistance in the payment of burial costs and care for widows and orphans. Policies have evolved as a product, and today, there are different financial options.

Life insurance is a contract between you and an insurance company to ensure the financial security of your family or dependents in the event of your passing. After purchasing an insurance policy, you will make regular payments to the company.

In the event of your death, the company will pay out the agreed-upon amount to the beneficiaries of your policy. They can use the money for things like funeral costs and covering the financial gaps your passing may create, such as mortgages and bills.

Who Needs Life Insurance?

Experts say that if you are still single and have nobody dependent on you, or if you are retired or about to retire, life insurance isn't really necessary. However, if you have a family or are planning to start one, life insurance is something you should definitely consider.

The golden rule is: if there is anyone who will take a financial hit in the event of your passing, you need life insurance to support them. The more people dependent on the policyholder, the larger the policy should be.

It may be necessary to consider some life insurance coverage even if your family is not entirely dependent on your income. After all, your death could generate unexpected costs when your spouse, children, or relatives have to pay for the funeral and other associated expenses.

How Much Does It Cost?

Policies are divided between term and permanent life insurance. The first covers you for a fixed amount of time (periods of 10, 20, or 30 years, for example), while the second covers you until the end of your life.

Term life insurance is usually cheaper and has no value if you outlive the contract. In the case of permanent life policies, everything you put in is paid back in the event of your passing, no matter when it occurs. The total investment builds cash value over time and doesn't expire as long as you pay the premiums.

Costs can vary widely, and insurance companies consider many factors related to the policyholder: age, sex, weight, general health, and habits (whether you smoke or have smoked in the past). Some insurers even ask their potential customers to have a medical exam to qualify.

How Do I Get Life Insurance?

There are many different policies and insurance companies out there. Some companies even allow you to bundle life insurance with other policies, such as home insurance or health insurance.

Ideally, you shouldn't choose the insurer based only on the lowest price. After all, your family's financial stability may depend on it in the future. When deciding which insurance company to go with, consider the coverage costs, the products they offer, and especially the opinions of other customers. For example, you can read a few Bestow life insurance reviews.

Ensure Your Family's Future

As sad as it sounds, one day, you will no longer be here to provide for your family or dependents. For this reason, life insurance is a protection against the unknown. In having some coverage, you pay for peace of mind knowing that the people you love will have financial security in the event of your passing.

Research different companies and policies to find the best option for you. Remember that consumers with healthy habits will pay less for their policies and consider it an incentive to live healthily. Even though it looks like an investment that you will not enjoy directly, life insurance can guarantee a better future for your family, which is priceless.

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About the author

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Kathy Barnes

Kathy Barnes is a finance writer and has been writing about the financial industry for more than 10 years. Kathy is an expert in what she does, with her research being cited by many of the top news outlets. Her goal is to help people understand how money works and how they can use it to achieve their future goals.


Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.


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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

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