Life insurance is a unique type of insurance, in that its financial benefits aren’t solely for the policyholder. The death benefits that a life policy provides are given to beneficiaries if the policyholder passes away. In this sense, life policies are really for the people and organizations that a policyholder cares about and wants to financially provide for.
Some life policies provide investment vehicles along with death benefits. The investment options and any earnings that they generate are generally for a policyholder to use as they like, and they’re very much for the policyholder. These aren’t included in all policies, though.
The death benefits that life policies provide can, in most cases, be used by beneficiaries for any purpose. Many people, however, tend to use the funds that a life policy provides to:
Alternatively, death benefits can also be used to fund trusts, donated to charities, pay off business debt, or for just about any other purpose.
Life insurance policies can be separated into term life and whole life policies.
Term life policies provide coverage for a set term, which is agreed on beforehand. Policies with terms between 10 and 30 years (usually in 5-year increments) are common, but a term may be any amount of time that an insurer and policyholder agree to. Term policies usually don’t have any investment vehicles.
Term life policies only provide coverage if a policyholder passes away during the covered term. Should the policyholder outlive the policy, it won’t award any death benefits when they pass away. Because the likelihood of a claim is fairly low, the premiums for term coverage are often quite affordable.
Whole life policies, which are sometimes called universal policies, don’t have a set end date. Instead, they’re designed to provide coverage for a policyholder’s entire life -- up to the day they pass away. Additionally, many whole life policies also include investment vehicles within them.
Because whole life policies are designed to last a policyholder’s full life span, their premiums are often higher than those of term policies. Additionally, whole life policies’ premiums can increase as a policyholder ages. These policies are designed to also have investments grow, though, and the earnings from investments can eventually outgrow the premiums. Many policies reach a point at which they pay for themselves, because the investments generate more income than the policy costs.
Many Massachusetts residents may want to consider a term or whole life policy. Coverage can be especially beneficial for people who:
Residents who want to compare term or whole life policies should contact an independent insurance agent who’s licensed in Massachusetts. A licensed, independent agent will be able to quickly compare several life insurance policies and show residents the best choices for their situation.
No one knows precisely when they’ll pass away. Everyone will eventually pass away, though, and they could go when they least expect to. Because people can’t predict when they’ll die, life insurance policies are available to Massachusetts residents, so they can ensure their loved ones will be financially cared for even after an unexpected passing.