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Is Life Insurance a Good Investment?

While many adults have already purchased life insurance because of the incredible benefits that it can provide, many others have not yet explored coverage options or made a purchase.

The reality is that some people simply do not see the need for it, or they may not believe that the regular premium expense is worth the benefits that it can provide. Not everyone needs to or should buy life insurance, but it is a sound investment for many people.

When you understand the many reasons why others buy life insurance, you may be able to determine if this is an investment that you should purchase.

Understand the Types of Coverage Available

Before learning about the benefits of life insurance, you need to understand more about the two primary types of coverage. The first type of life insurance is term coverage, and common term lengths range between 15 and 30 years. At the end of the term length, the coverage ceases.

The second type of coverage is universal or cash value life insurance. This type of insurance offers the same death benefits as term life insurance, and it also can accumulate cash value over time. Typically, universal or cash value life insurance has a higher premium amount than term coverage, and the coverage does not have a fixed term length. Coverage can extend for the insured’s entire life.

Examine the Benefits of Life Insurance

Both of the primary types of life insurance provide beneficiaries with death benefits. Death benefits could help survivors avoid having to take out an emergency loan to pay for funeral expenses and other related end-of-life expenses. In addition, the death benefits can also be used to supplement income that the deceased provided to the family in his or her living years. Death benefits are commonly used to pay off debts, to pay for a surviving child’s college education and more.

A universal or cash value policy offers these same benefits, but it also has the additional benefit of being a true cash asset. You may be able to borrow against the cash value or even to retire the policy when it is no longer needed to access the cash value component.

Determine Your Coverage Needs

Because not every individual may need to buy coverage, it is important to determine what your unique needs are. Consider if you have survivors who may be negatively impacted on a financial level by your death. These may be individuals who are financially dependent on you in various ways. You may also consider if you have debts or if a surviving spouse may have retirement plans thwarted if you pass away.

On the other hand, some people are financially independent. They may have minimal debts, if any. They may also not have dependents. In these situations, life insurance may not be necessary.

If you plan to purchase life insurance, spend time learning more about the differences between these two types of coverage. Then, speak with a life insurance representative to estimate the amount of coverage that you need. Some people will purchase smaller universal and term policies rather than a single large policy to take advantage of the benefits that both insurance types can provide. You also need to determine the term length that is most ideal for your needs if you plan to buy term coverage.

Peter Christopher

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