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home > basics Life Insurance BasicsThe process of buying life insurance is a series of decisions: choosing a type of policy, selecting your level of coverage, and naming a beneficiary are all important decisions you will have to make.
The purpose of life insurance
In its most basic form, life insurance offers security in the event of your death. Like all insurance, life insurance protects your family from the risk of financial ruin. It provides your dependents with the necessary funds to settle your financial obligations and to cover the loss of income created by your death. Your decisionsThis basics section is dedicated to exploring the three decisions you will have to make when purchasing life insurance coverage. They are: Sidebar But for now, let's look at the three decisions you will have to make: Choosing the beneficiaryThe beneficiary, put simply, is the person whom you want to receive the life insurance proceeds at the time of your death. Usually, this is pretty cut and dry. A spouse is the most common beneficiary, followed by children, but anyone can be named as a beneficiary. (More on choosing the beneficiary) Choosing the types of insuranceThe types of insurance are categorized as term or permanent insurance. Both offer basic coverage, but for different time periods. The cost of term life insurance is usually much, much lower than permanent insurance. Calculating the level of coverageThe amount of money your family receives after your death is called a "death benefit". You might be more familiar with a person being insured for a specific amount, and that is exactly what the death benefit is: the amount for which you are insured. Next: A look at naming your life insurance beneficiary. |
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This website provides general information for educational purposes only and is not intended to be legal advice. We make no guarantees as to the validity of the information presented. Your particular facts and circumstances, and changes in the law, must be considered when applying life insurance law. You should always consult with a competent life insurance professional licensed in your state with respect to your particular situation.