Who should purchase life insurance? Author:    Posted under: Life InsuranceLife Insurance questions answeredLife Insurance Types


One of the scariest things one thinks about is his/her death. Let’s face it, nobody really ever wants to sit down and think about your own demise. Not unless standing on the edge of a cliff or playing with a set of butcher knives as a way to pass time are some of the things you fancy. Not all of us though, have jobs that would easily make Evil Knievel drool from his grave. But if ever you do find yourself thinking about whether you should or not purchase life insurance, these are some points that may help you.

What is Life Insurance?

Life insurance is a form of insurance that pays out when someone dies. It is the kind of insurance policy that you yourself will never get to “enjoy”. It is a policy that you actually buy for someone else that you will leave in the event that you pass away before your time. It is a purchase of a specific death benefit. Let’s say you buy a $100,000 life insurance policy, for example. You then assign that $100,000 benefit to a specific beneficiary, like your spouse or your kids. They will then receive $100,000, should you die during the term of the insurance.

Types of Insurance

There are numerous types of Life Insurance to choose from, but all of which falls under these three types:

Term Life Insurance. Term Life Insurance simply put is the pure unadulterated Life insurance. It provides coverage only for a limited number of years, and the policy owner pays a fixed premium for the duration of the term of coverage.  (The alternative to term life insurance is permanent life insurance, which encompasses whole life insurance and universal life insurance.)

Whole life insurance is considered to be the priciest of the principal types of life insurance, but it guarantees a death benefit, a fixed premium, and a cash value growth rate. Unlike universal life insurance in order to keep this policy from lapsing, the policyholder only has to make regular payments of a fixed premium, just as though this were a simple term life insurance policy.

Universal life insurance is permanent life insurance which offers the holder the most flexibility but also requires the most care in order to keep the policy on track.  It is less expensive than whole life insurance but more expensive than term life insurance.  With universal life insurance, the growth of cash value is not fixed and there is no set schedule of payments.  In order to ensure that the policy remain in force, the policy holder must attend to the amount of cash value saved up and at all times maintain enough to meet the insurer’s charges.

Who Needs Life Insurance?

For some, Life insurance can be an awful waste of money, but for others it could mean a crucial investment especially for those who really need it.

If you are a married living alone in an apartment or a house, do you need life insurance? If your spouse does not work and you want to provide for him/her in the likely event of your death, then yes.

If your spouse does work but let’s say he/she could not possibly afford to pay your house with only one income, then yes. Otherwise, probably not. Having life insurance would be nice, but it is not essential.

What if you have kids who depend on your income? Then Yes, unless you are rich enough to be “self insured”, you need life insurance. You need enough coverage to allow your spouse and children to still live a comfortable life in your absence and the absence of your income.

But what if you are a single man or woman living alone in an apartment? Do you need life insurance? No. There is no one in your life that is dependent on your income. Therefore you would have no beneficiaries. You might as well buy a small policy to pay your funeral expenses at death.

Now let’s say that you are a single man or woman living alone in a house with a fairly expensive mortgage. Do you need life insurance? Maybe. The reason you might buy life insurance is to save whomever you have willed the house to, the problem of disposing of your estate. For example, imagine that you die. Let’s say whoever inherits the house wants to dispose of it, but it sits on the market for a few years before selling. During that time he/she has to pay the mortgage payments, and that might be a burden. Therefore you might buy a policy to cover the expected payments over a specified number of years or the entire mortgage.

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