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What is Life Insurance Used For: How to Choose and Use a Policy

Life insurance is an incredibly important subsection of insurance, and yet many people don’t understand it. Unfortunately, this lack of understanding can lead to people making poor decisions about their insurance, or forgoing it altogether. Roughly half of American adults have said that they haven’t bought life insurance because they are unsure of how much they need or what type to get.

Here we will answer some of your life insurance questions like what is life insurance used for, how to choose a policy, and what you as a beneficiary are allowed to use the funds for. 

What is Life Insurance Used For?

You might be asking yourself what is life insurance used for, here is a simplified explanation: Life insurance is first and foremost used as a tool to protect your loved ones in the event of your death. It gives them a financial cushion to fall back on as they cope with the loss after your passing. But it can also be used as an investment tool and for other purposes. 

Life insurance is a contract between an insurance company and an individual or group in which the insurer agrees to pay a designated beneficiary a sum of money upon the death of the insured. The policyholder pays premiums, either in one lump sum or in installments, to keep the policy active.

How to Choose a Life Insurance Policy

When you’re choosing a life insurance policy, there are two main types of policies to choose from: term life insurance and whole life insurance. Term life insurance is temporary and only covers you for a set period of time, typically between five and 30 years. Whole life insurance, on the other hand, is permanent and covers you for your entire lifetime.

The amount of coverage you need depends on factors like your age, health, lifestyle, and dependents. A good rule of thumb is to get coverage that’s worth at least seven to ten times your annual income. So if you make $50,000 per year, you should have at least $350,000 in coverage.

What Are The Risks of Getting a Life Insurance Policy?

There are a few risks associated with getting a life insurance policy, but they are usually not enough to deter people from getting coverage. The main risk is that you may not be able to get coverage if you have a pre-existing medical condition. If you do have a pre-existing condition, you may be able to get coverage through a high-risk life insurance policy.

When You’re a Beneficiary What Are You Allowed to Use The Funds For?

As a beneficiary of a life insurance policy, you are typically allowed to use the funds for any purpose. However, there are some exceptions. For example, if the policy was taken out as part of an employee benefits package, the funds may need to be used for expenses related to the death, such as funeral costs.

How Bethany Insurance Can Help

Life insurance is an important decision that should not be taken lightly. There are many factors to consider when choosing a policy, but the most important thing is to make sure you have enough coverage to protect your loved ones. 

At Bethany Insurance, we are here to help you choose the right insurance policy for your needs. We understand that this can be a difficult decision, and we are here to answer any questions you may have. Contact us today to get started!

 

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