Life insurance is a legally binding contract between an insurer and a policyholder. As per this contract, the former guarantees paying a death benefit to the listed beneficiaries when the policyholder passes away. The insurer provides this in exchange for premiums the policyholder pays.

Who Should Buy Life Insurance?

Life insurance provides financial protection to surviving dependents or other beneficiaries after the demise of the insured. Here are some examples of people who should buy life insurance.

Parents with Minor Children: If a parent passes away, it may create financial difficulties and affect the care received by the children due to the loss of the late parent’s income. Life insurance can help provide financial support to the kids until they can become financially independent.

Families Who Can’t Pay Funeral Expenses: Life insurance can help families honor a loved one’s passing by providing financial resources to the family for holding a burial and funeral.

Young Adults Who Want to Get Lower Rates: The younger and healthier you are, the cheaper the life insurance premium will be. A young adult (for example, someone who is 20 years old) can purchase life insurance even without any dependents if there’s an expectation that there will be people depending on them in the future.

Apart from this, people with special-needs adult children, young adults whose parents took out a private student loan or cosigned a loan for them, businesses with key employees, and married pensioners should buy life insurance.

Types of Life Insurance

There are several types of life insurance, including:

Term Insurance: It lasts for a specific number of years and then expires. You select the term while choosing the policy. The most commonly chosen terms are 10, 20, or 30 years.

Permanent Insurance: It remains valid throughout your life unless you cancel the policy or stop paying premiums. It is typically more expensive than term insurance.

Whole Life Insurance: It’s a type of permanent life insurance that accumulates cash value over time.

Level Term Insurance: The premiums remain the same every year.

Increasing Term Insurance: The premiums are low when you are younger and increase as you grow older.Universal life insurance, burial or final expense insurance, and single premium insurance are some other types of insurance.Life insurance can also provide additional benefits like providing money to fund your retirement, cash value to borrow against, and tax avoidance.