Life insurance is a difficult topic to discuss. Many people are uncomfortable thinking, much less talking, about it. It may be called "life insurance", but it conjures up thoughts of death.
Life insurance serves two main purposes. The most common reason to buy life insurance is to insure your salary. If the worst happens, will someone miss your income? If you have a dependent, a child or maybe a sick parent, the loss of your income can prove financially devastating for them. To protect the people you love from financial problems, you get life insurance. If you die, the policy will pay out. The beneficiaries of the policy will get money that will pay for your funeral and, at least temporarily, replace your income.
If you don’t have an income, it may still make sense to take out a small life insurance policy to cover the funeral and related expenses.
This type of policy is called term life insurance. You insure yourself against death for a certain term (i.e. 30 years). As long as you keep making monthly payments, the policy will stay valid for that term.
The second reason for buying life insurance is investment. These types of policies are called whole life. In addition to insuring against the event of your death, these policies have an investment component. They money is invested in stocks and bonds on your behalf. Overtime, the policy builds value. You can borrow money against it, or even cash it out. Some whole life insurance policies are flexible. As you get older, they adjust the proportion of the money that is invested.
If you’re thinking of getting life insurance, shop around for the best insurance rates. Get several quotes from different insurance agencies. Even if you’re only getting term life insurance, it’s still a costly investment and should be taken seriously.