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After all, life is unpredictable.
Making things easier for your spouse and family if the unexpected happens seems like a wise choice.
However, various factors come into play when deciding whether or not its the right choice for you.
Heres how to determine if you would benefit from having life insurance.
What Is Life Insurance?
Life insurance is designed to provide financial support to your loved ones in the case of your death.
When you sign up for life insurance, you enter a contract with the insurer.
The insurer agrees to pay your designated beneficiaries a lump sum upon your death.
In exchange, you pay a premium on a set schedule.
Who Benefits From Life Insurance?
Your beneficiary benefits from your life insurance policy.
A primary beneficiary is typically your spouse, child, family member or friend.
However, it also may be a trust, charity, business or an estate.
Heres some ways they can use the funds.
Cover Funeral Expenses
Thenational median costof a funeral with viewing and burial is $8,300.
Life insurance could potentially cover those costs with money left over.
Provide an Inheritance
Life insurance doesnt have to be used in a specific way.
In that case, you’re free to pick a charity to receive the funds upon your death.
Types of Life Insurance
Life insurance is not one-size-fits-all.
Consider these different options to meet your needs.
Term
Term life insurance provides temporary coverage.
It only offers coverage for a set number of years, such as 10, 20 or 30.
During the term, youll pay premiums.
Should you die during the term, the policy will pay your beneficiary.
You also can borrow or use money from a whole life policy to pay your premiums.
Upon your death, thedeath benefit portionof the policy is paid to your beneficiaries as a tax-free lump sum.
However, in general, the cash value portion of your policy is kept by the insurance company.
you could also borrow or withdraw funds from the policys cash value.
Universal life, like whole life, generally does not pay thecash value portionof the policy to the beneficiary.
Instead, the amount reverts back to the insurer.
Variable
Variable life insurance coverage is also considered permanent.
It provides both a death and cash value benefit thatgrows tax-deferred.
Like UL insurance, the variable life insurance cash value benefit is variable, which means more risk.
you might takeloans or withdrawalsfrom a variable life policy.
Additionally, some variable life insurance policies allow you to pass on the policys cash value to your beneficiary.
Youll also want to think about your familys future needs and your overall financial situation.
This ensures your family has enough to cover both immediate expenses and future needs.
Overall, understanding your unique situation and planning ahead will lead to the best decision.
In any of these instances, life insurance can be valuable to have.
Takeaway
Finding and working with a financial advisor is a great idea.
A financial advisor will help keep track of your finances and assist you in attaining your financial goals.
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