Basic Life Insurance Considerations

For a number of reasons people feel squeamish thinking about mortality and life insurance. The practical matters that surround death can be quite unsettling. Whether it's your own demise or someone who is close, you're forced to think about what life will hold for those who live on without their breadwinner.

An overwhelming flood of questions can come to mind. What will the family do to get by financially? How much coverage is needed? What type of policy would best suit the situation? How much will an adequate policy cost? Do affordable life insurance policies exist for the situation?

Cash Can't Replace a Life, But It Can Pay for Groceries

Even though death is inevitable, life insurance is not. Buying it is a choice, and the very idea of life insurance seems to place a monetary value on a person's life. But actually that's not the case.

The face value of a life insurance policy is nothing more than an estimate of how much money would be needed to financially sustain a family or business unit if the breadwinner or other key person should die. For practically anyone who needs to protect the financial interests of their dependents, affordable life insurance policies are available.

Who Can Buy Life Insurance?

A life insurance policy is a contract between the policy owner and an insurer or insurance company. Typically, the policy owner is a spouse, a close family member, or a business partner. The policy owner, or holder, must have an "insurable interest," that is, something at stake in the life of the insured. The insurer agrees to pay a sum of money to the policy beneficiary or beneficiaries in the event of the insured person's death.

Who Needs Life Insurance?

Not everyone needs life insurance protection. The primary purpose of life insurance is to make up the financial difference between the resources a household would have at their disposal and what they would need if a breadwinner dies. The face value of the insurance policy defines the amount of money that would be paid to the beneficiary or beneficiaries. A life insurance policy hedges against the risk that the insured person may die and leave dependents in financial straits.

Some personal finance professionals say they'd like to see creation of a law requiring adequate life insurance coverage for anyone who has others' lives depending on them for financial support.

What Does "Affordable" Mean?

Affordable life insurance policies provide a calculated amount of money for the insured person's dependents to use as they stabilize their financial situation. However, the initial cost of premiums is not all that should be considered when purchasing affordable life insurance policies. While premium payments may be affordable month-to-month, the family cannot afford to be under-covered for their financial situation, nor can anyone afford to buy insurance from a company that may not be in business when it's time to claim policy benefits.