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As you move into adulthood, you may encounter people who suggest that you invest in life insurance. If you have a family and children to look after, life insurance is an extremely important step in ensuring your family’s financial security in the long run. However, while there is no doubt about the fact that you have heard about life insurance before, you may be completely blank about what it means and how it works.
In this article on life insurance basics, we will walk you through the very fundamentals of what life insurance is and why you should invest in it. If you are completely confused by the nature and purpose of life insurance, keep reading so that you don’t look like such a dummy the next time it comes up in conversation.
What is Life Insurance?
For those who are entirely new to the field of life insurance, you can think of it as kind of like a financial product that one invests in. A life insurance policy ensures that your family will receive a lump sum of money in the event of your unexpected death. This is very important for families who have a single breadwinner.
Life insurance is bought from an insurance company with whom you sign a legally binding contract. Once you have qualified for life insurance, you are bound to make payments to the insurance company as part of your contract. These payments are known as “premiums” and are paid to ensure that your family, also known as “beneficiaries,” receives the financial insurance after your death.
For the reasons outlined above, a life insurance policy is both a financial and legal contract. It is financial in the sense that you are investing in financial security for your beneficiaries. Further, in the sense that the life insurance contract must be followed through after your death, it is a legally binding contract.
Why Should I Get Life Insurance?
Almost anybody can apply for life insurance so as long as they can qualify for it. To qualify, you must be able to pay the monthly amount to the insurance company. Moreover, there are various reasons to invest in life insurance, but these differ from person to person.
If you are your family’s breadwinner, it is imperative that you get life insurance in order to ensure that your family will be financially secure in the event of your death. Other people who should get life insurance are those that may not have children, but whose parents and siblings depend on them for financial stability.
While there are other reasons why people get life insurance, explaining them would go beyond the scope of a guide for dummies. For now, just know that you should get life insurance if you want to ensure the financial security of someone you may leave behind in the event of your death.
To Sum Up
Life insurance is a very important part of long-term financial planning during adulthood. Many approach the topic of life insurance as a very complicated topic. As you can see, however, there is nothing complex about this topic at all.
The key takeaway here is that life insurance is an affordable policy for many people who need to invest in the long-term financial security of their loved ones.