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Feb 28

What’s the Purpose of Life Insurance?

Reading Time: 2 mins

54% of Americans have recognized life insurance benefits and taken out a policy for themselves. If you’re in the large minority of those who haven’t, however, then you may be wondering what the point is. So what does life insurance do? At its heart, life insurance is a contract between you and an insurer. You pay a monthly premium, and they promise to pay a lump sum to your beneficiaries after your death. Here’s why life insurance is important.

 

Protecting Your Savings

The first and most important reason to take out life insurance is to protect your existing savings. Think of it as a kind of safe box where you can keep all your money and ensure that thieves or fraudsters don’t take it. In addition, having life insurance means that, whatever happens, your loved ones will get the inheritance you’ve been saving for them.

Investment fraud negatively impacts around three million Americans each year. Of course, no one wants to go through this, but unfortunately, you could be a target if you have a bit of money saved up. A solid life insurance policy will help safeguard these funds and replace them if they go missing.

 

Paying Off Debts and Final Costs

Death can be surprisingly expensive. If you have any debts – as 45.4 million American households do – this needs to be paid, even if you pass away. This burden will fall onto your closest family members, who may not have the means to cover the costs. If you’ve got life insurance, though, then some or all of these debts can be paid off using that.

Even if you’re debt-free, there are many other costs related to dying. These are called final costs and include funeral fees, cremation costs, estate settlements, and any outstanding medical bills for the last period of hospital care. Again, this is a huge burden to place on your family members. Life insurance will pay some of these costs, so they don’t have to.

 

Supporting Your Loved Ones

As you get older, you’ll begin to realize that much of the money you save won’t be for you. It will become clear that this is money that you’re saving for your children, grandchildren, and any other close family members. A good way to ensure they have the inheritance they deserve is by putting it into an insurance policy. The insurer will promise to pay them this fund once you pass away.

If you want to give your loved ones financial support after you leave this world, then have a peek at the Insurance Hero website to find the right option for you. There are many different life insurance policies, so it’s important to find one that fits your circumstances. In addition, you can build up a hefty inheritance fund with a bit of research.

Life insurance has several functions, like any insurance policy. This ensures your savings are safe and helps your family members cover the costs they will incur when you pass away. Most importantly, it protects your loved ones and guarantees they have financial stability even when you’re gone.

 

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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