Life Insurance to Safeguard the Future of Loved Ones

When you are young you may not think about death much and it may not bother you if you don’t have any dependents. A life insurance essentially provides for people who are left behind rather than the person whose life is insured. Generally, the beneficiary is the family member of the deceased. It could be the wife, children or both and the person can elect it at the time of arranging the coverage.

At times even third parties can buy insurance on your life. As long as they have insurable interest on your life they would be able to get a policy underwritten. For example, a spouse can insure the life of the other. An employer may be able to buy insurance coverage on a key employee on the bases that they would stand to lose if such person was to die. But generally, people arrange the cover for their own life.

When you have a family you have dependents who would suffer terribly if they lost their mothers or fathers. When you start thinking what would happen to your family once you are gone you start thinking in the direction of a life insurance policy. It is usually a lump sum cash payable on death to beneficiaries or the estate of the deceased. The only proof may be needed is the death certificate.

They can be bought to pay a mortgage off and may be required by the lender. It is a very effective financial instrument to cover for certain liabilities in case you prematurely die. Of course your family is your liability and leaving money to take care of them is a way of fulfilling this liability.

These policies can be bought either until you die or up to certain age. When you think that mortgage will be paid and your children will be adults by then you may feel that you don’t need the policy. Some people buy life insurance as a financial planning tool. They buy it so that their children can get all their inheritance. In other words, inheritance tax is paid out of the proceeding of the policy and children get to keep the whole of the estate.

It can be bought as a decreasing coverage and it is called reducing term. This would mean that every year that you are closer to the maturity of the policy the cash value of it goes down. It can also be bought as a level term cover that pays the same amount until either expiry or death. People can buy joint life policies as well. This is one policy that pays on the death of one of the insured parties. Usually, husband and wife can buy joint policies and when one of them dies the other receives the proceeds.

Policies can be pure life or they may include an investment element in them. If you survive the term of the policy you would get nothing with a regular life insurance coverage. But you will receive the proceeds of the investment element if you have any included at the purchase. You are highly advised to see an independent financial adviser to look at your options carefully.