One of the types of insurance that my husband and I are considering purchasing is life insurance. This is a difficult one to think about, because it involves conscious decision making about financial matters related to the death of a loved one. There are many reasons why it is important to have life insurance, even for people who are young and healthy.
All insurance is designed to give you some assistance in the case of a financial crisis. Health insurance covers the financial aspects of medical care, in case an emergency happens. Homeowners insurance covers the financial costs of replacing or repairing your home and property in case of a disaster. Life insurance is designed to cover some of the costs that occur when someone dies. Losing someone you love is hard. No one wants to deal with the additional stress of trying to sort out financial matters while grieving. This is one good reason for people to make sure they have a life insurance policy.
What does life insurance do? When a person dies, his or her life insurance policy will pay whomever that person designated as their beneficiary. If there is more than one beneficiary, the amount will be divided between them. Usually, the beneficiary is a person’s spouse. Life insurance covers funeral costs, the cost of burial, and some medical bills that the person’s health insurance will not pay for. The life insurance policy covers something called “death taxes”, which might also be called “estate taxes”, or “inheritance taxes”. This is the taxes that are levied on the property of a deceased person, which has now been inherited by the person’s beneficiary. The remaining portion of money that was given to the beneficiary can be used to pay off other bills, such as the remaining amount that is left on a mortgage. In general, a life insurance policy can provide “peace of mind”. It can be a relief to know that bills will be taken care of in case someone passes away.