Important and Basic Facts to Know about Life Insurance

Financial obligations and debt tend to have a life of their own. Unfortunately, these do not automatically get expunged when the unexpected happens, but instead are passed on to the surviving family and can result in financial hardship.

One effective solution to avoid burdening loved ones with financial headaches: life insurance.

Life insurance is generally paid out after the insured’s passing. This money can go a long way to clearing up debt left behind so that the surviving family members don’t have to make hasty decisions that are financially motivated. For example the surviving spouse may not be able to handle the monthly mortgage payments and need to quickly sell the house. It may not be the best time of year to sell, a move is stressful at the best of times and the kids may have to start at a new school. All this turmoil while missing the deceased can be devastating for a family.

Beneficiary

When an insurance policy is paid out because of death these funds are paid directly to the named beneficiary in the policy. These funds by-pass the Will and pass directly to this person and are tax free and creditor protected. If the person insured had a lot of debt this money cannot be claimed by creditors. Now the beneficiary can choose how to spend this money. Rather than pay the mortgage off completely, it may make more sense to just pay the monthly mortgage payment. The important thing to note here is the family has choices and do not have to make rash decisions motivated by financial problems.

Premiums

This is the amount that must be paid on a regular basis to maintain the policy. Various factors determine how much the premium will be, such as the amount of coverage or Face Amount of the policy, health and lifestyle of the insured, and the type of policy. Note that temporary or term insurance, generally has a lower premium than permanent insurance.