What is Life Insurance | Why To Buy Life Insurance


In today’s article, I want to share with you what is life insurance and how it works you see there are many unexpected things.

That occurs in our lives we might pass away due to an accident or we might pass away due to an illness but there is one thing that we are hundred percent sure of that is we will pass away someday in our lives you see insurance is a product designed to provide you a measure of protection at least financially should a disaster happen and life insurance.

What is Life Insurance

It is specifically designed to protect your beneficiaries financially should you pass away one day so what exactly is life. Insurance and how does it work now before we move on. I have a unique view of what works and what doesn’t in the financial planning world and it is my hope that I can pass this experience to the new generation of future financial advisers so.

they don’t have to go through the same struggle as I have life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to the named beneficiaries upon the death of the insured to put it simply you pay a sum of money called the premium to the insurer and when you pass away your beneficiaries usually your family members get a lump sum of money called the death.

Benefit now the next question is should you buy life insurance you should buy life insurance if you have anyone who may depend on you for financial support for example your kids or elderly parents however if there is no one that requires you to support financially.

Why To Buy Life Insurance

Then life insurance is not required now let’s take a look at a typical example of life insurance we have John a 50-year-old sole breadwinner of a family with a wife and two lovely kids like most families John has a property on a mortgage of 20,000 kept aside in cash and the same amount he owes to a creditor in debt of $20,000 now if one day when John passed away his estate would have to be distributed firstly his 20,000 cash set-aside might be taken away by his creditor secondly.

Because he’s the only one working in the family his property or mortgage might be taken away as well this leaves his wife and kids with no shelter and no money to survive his kids might also be in college and will be deprived of the needed funds for education but the wait can all these problems be avoided if and only if John had a little life insurance.

conclusion

Now let’s take a look at what happens if John did purchase a life insurance policy if John did purchase life insurance his commitment will be to set aside a portion of his income and give it as a premium to XYZ insurance company upon John’s death XYZ insurance company will provide John’s family a lump sum that is called the death benefit which would go to his family now this lump sum of money can be used to pay off his mortgage loan his family’s expenses and in most jurisdictions, this sum of money is being protected from his creditors his children now also have the required money to go into college now you see why life insurance is important to everyone with a dependent on you.