Life insurance is a policy that provides a benefit upon the policyholder’s death. The benefit is paid to the policyholder’s chosen beneficiary. It’s then the beneficiaries’ responsibility to use the funds in a reasonable manner. Here are some questions you might have if you’re currently considering life insurance.
What Can the Beneficiary Do with the Money?
The beneficiary can do whatever they want with the money. In most cases, the money is used to pay burial fees, final medical expenses, and household expenses. Depending on the size of the policy, there might be money left for years to come. The money can pay for an education, replace lost income, buy a new house, and more.
Who is the Beneficiary?
Most people choose someone who they trust to act as the beneficiary. You could choose a spouse, family member, friend, or child. But if a child is chosen, that child won’t have access to the money until they’re an adult.
What Type of Life Insurance is Best?
The type of policy you choose depends on your needs. A term life policy is good for a specified period of time. If you die before the policy expires, your beneficiary gets the benefit. Most people like term policies because they’re relatively inexpensive.
Whole life and universal life insurance policies never expire. You just have to keep the policies active and avoid letting them lapse. A whole life policy accumulates cash value, and it offers consistent premiums. A universal life policy has flexible premiums, and it offers a savings option.
Should I Get a Life Insurance Policy for My Child?
A child can have a life insurance policy the same as an adult. No one wants to think about the death of their child but it can happen. Some people get coverage for their children so they’ll already have coverage when they become adults. This is worth considering if you get your child a policy that accumulates savings. Generally, the longer you wait to get coverage, the higher your premiums.