What Do People Use Life Policies’ Death Benefits For?
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:
- Help pay for funeral costs
- Pay off outstanding debts that the policyholder owed
- Pay for end-of-life care the policyholder received
- Compensate for a decrease in income
- Any other financial needs that the beneficiaries may have
Alternatively, death benefits can also be used to fund trusts, donated to charities, pay off business debt, or for just about any other purpose.
How Are Term and Whole Life Policies Different?
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.
Who in Massachusetts Should Have a Life Policy?
Many Massachusetts residents may want to consider a term or whole life policy. Coverage can be especially beneficial for people who:
- Are the primary income earners for their families
- Have disabled or handicapped loved ones they want to make sure are cared for
- Want to ensure their spouse or partner is well cared for later in life
- Want to leave a legacy by funding children or grandchildren's college education
- Operate a business with partners and are vital to the company’s operations
- Desire to make a difference by donating to a charity or cause
How Can Massachusetts Residents Get a Term or Whole Life Policy?
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.
