Having the peace of mind that your family will be financially secure in the event of your death is priceless. Read on to learn more about how life insurance payouts work and what type of policy you need to buy if you want to leave behind a substantial inheritance for your loved ones.
How Do Insurance Payouts Work?
At the time of signing up for a life insurance plan, you’ll need to choose your coverage amount, which is also called the death benefit. If you happen to pass away during the term of the policy, your beneficiaries will receive the death benefit as a payout. Based on the terms of the insurer and the type of policy you purchase, your beneficiaries can choose to receive the death benefit in installments over a certain period of time or as a lump sum.
What Type of Life Insurance Plan Will Help You Leave Behind an Inheritance?
The two primary types of life insurance are permanent or whole life and term life insurance.
Term insurance, as you may have guessed from the name, lasts for a certain number of years, while permanent life insurance lasts for life, as long as you continue paying premiums.
If you want a policy that will pay out regardless of when you pass away, a permanent life insurance plan is a good choice. If you need temporary coverage (say, while you are employed or until your kids graduate college), a term insurance plan is a great choice.
There are pros and cons to consider with both types of policies. Term insurance is significantly more affordable than permanent life insurance. But, of course, if you need long-term coverage, you’ll need a permanent life insurance plan.
The Bottom Line
Life insurance can be affordable or expensive, based on the type of plan you purchase, the coverage you opt for, and the term you select. What’s more, your age and health also impact premiums. So, if you’re considering buying a life insurance plan, it’s best to purchase one as soon as possible. If you’re unsure which plan to opt for, you should talk to an independent advisor about your options.
