Life insurance is a very common asset that figures into many people’s long-term financial planning. Purchasing a life insurance policy is a way to protect your loved ones, providing them with the financial support they may need after you die. For example, you may purchase life insurance to help your spouse cover mortgage payments or everyday bills or fund your children’s college education.
When purchasing life insurance, it’s important to understand how it works and how your beneficiaries can receive the proceeds of your policy. This can help with choosing a payout option that works best for your estate planning goals.
KEY TAKEAWAYS
- Life insurance is a contract between a policyholder and an insurance company that’s designed to pay out a death benefit when the insured person passes away.
- There are many kinds of life insurance from term to permanent.
- A life insurance company should be contacted as soon as possible following the death of the insured to begin the claims and payout process.
- It’s important to always name life insurance beneficiaries, whether they are individuals or organizations.
- There are different ways a beneficiary may receive a life insurance payout, including lump-sum payments, installment payments, annuities, and retained asset accounts.
