What is it?
Life Insurance is an insurance product that protects your ability to provide for your loved ones in the event of an unexpected death by paying your surviving beneficiaries a lump sum.
Why is this important?
The plan is to live long, earn a fair income, and save money so that your family can live well, and you can pass on some of your wealth to your children. However, in the event of a premature death, your loved ones will not only inherit your savings, they will also inherit any debt, mortgages, loans, or bills you have, along with the costs of daily living.
Life insurance protects your ability to provide for your family after you are gone. In the event of an untimely death, Life Insurance will pay a lump sum to your survivors that will provide for them in your stead.
How does it work?
In the event of an untimely death, Life insurance pays a predetermined lump sum to your surviving beneficiaries. The sum is usually enough to pay for any expenses or debts that your income would have paid for during your working life.
You are working as a rideshare driver making $30,000 per year when you unexpectedly fall sick and pass away. Your spouse and children survive you and now need to pay for a mortgage, car payments, and living expenses. Thankfully you had a life insurance policy worth $200,000 that they receive upon your passing! Now they can not only pay the remainder of the mortgage and car outright, they also have money to cover expenses until they can begin to make incomes of their own and possibly even put some money aside for the future.