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Death is one of the few sure parts about life. Although no one plans on passing away, everyone eventually does. When they do, they leave family and friends behind. Life insurance provides Massachusetts residents with a means of providing for their closest family and friends after they pass away.
In its most basic form, life insurance provides death benefits. Death benefits are payments that are made to named beneficiaries of a policy, which may be family, friends or (sometimes) and organization.
Some types of life policies offer additional services, such as investment vehicles, that complement the death benefits offered.
Most life policies don’t place restrictions on how death benefits are used, which lets people use them for a wide variety of purposes. Depending on a policyholder's financial state when they pass away, their wishes and loved one’s financial situations, death benefits might be used to:
Occasionally, policyholders choose to name an organization as their life policy’s beneficiaries. In these situations, death benefits might be used to fund research, educational programs, scholarships or other worthy endeavors that the policyholder is passionate about.
Life policies can be grouped into two broad categories: term policies and whole policies. Both types of policies offer death benefits, but they differ in when they provide death benefits and what other services they provide.
Term life policies typically provide only death benefits, and they only provide death benefits for a set amount of time. A policy’s term might be any length, with ranges between 10 and 30 years being most common. If a policyholder passes away during a policy’s effective period, their beneficiaries will likely receive death benefits. After a policy’s effective period, benefits normally are no longer provided.
Whole life policies normally provide both death benefits and investment vehicles, and they usually offer these services for the duration of a policyholder’s life. Thus, these policies typically offer death benefits regardless of when a policyholder passes away, and they give policyholders a way to save for retirement.
Because term life and whole life policies are structured differently, they have different premiums. In general, term life policies’ premiums tend to be lower than whole life policies’. Which is more affordable, however, isn’t as straightforward as looking at only premiums.
Term life policies’ premiums are usually set up so that policyholders pay a set amount each month throughout the policy’s effective period. With the majority of term policies, this payment is the same on the first month of the effective period and the last month.
Whole life policies’ premiums increase slowly over time, so premiums later in life are often higher than the premiums were when a policy was first purchased. The investments in whole life policies also grow over time, though. When well designed, the investments in whole life policies grow more than the premiums. Once premiums become higher, the interest generated from the investments can be used to pay the premiums. This can effectively make these policies free later in life, as the investments may cover the higher premiums.
Massachusetts residents who are in situations where their passing away would create a financial burden for a loved one should consider purchasing a term or whole life policy. This includes:
For help finding life insurance, Massachusetts residents should contact an independent insurance agent. An agent can help residents decide between a term life and whole life policy, and they can request quotes for either type of coverage.