What can I use my life insurance for?

Life insurance can be used for a number of purposes.

Getty Images


When it comes to protecting your dependents, life insurance is essential. It’s a smart way to make sure your loved ones are taken care of when you die.

Of course, there are many factors to consider when trying to find out How much life insurance do you need?. And what type of life insurance you chose (whole or time) is based on your financial situation.

Once the amount and type of life insurance is determined you can start paying your premiums knowing that your loved ones will be safe and protected. But how will they be safe and secure? How do life insurance premiums work and what can the money be used for? The answers to these questions will help you decide if the type of policy you have – or want to upgrade – is adequate.

If you don’t have life insurance or want to increase the amount you already have, now is a good time to start. You can Get started with a price estimate today.

Regardless of where you fall on the life insurance coverage spectrum, however, it’s helpful to understand what the final payouts can be used for.

What can you use life insurance for?

Life insurance can be used for a number of purposes.

Most people will use a portion of their life insurance policy to cover funeral expenses. Those who have a spouse or children often buy policies so that their loved ones can pay for the benefits when they are gone.

You can also put the money into a trust so that the beneficiaries don’t get all the money when you pass. This can be useful if you have small children and want to make sure they are responsible for the money.

Sometimes people buy life insurance to provide an inheritance to their dependents. For example, if you are single and have no children, you may want to purchase life insurance with your grandchildren as beneficiaries. If you have pets, you can also purchase a policy so that your partner who is responsible for caring for your pets has the money to do so.

Some people buy real life insurance, such as Universal Life Insurance, to use as an investment. Unfortunately, these policies are often very expensive and often fail to match the stock market. You are usually better off investing in a retirement account like a 401(k) or IRA. Generally, only people who are very expensive would benefit from purchasing one of these policies.

One note: although this is what life insurance is usually used for, the beneficiaries can be used however the beneficiary wishes. There are no specific limits or requirements that must be met. The money you receive can be used as you wish.

If you don’t have life insurance, or, realizing what it can hide, you want to increase your current coverage, there are steps you can take. Getting a life insurance quote is a good first step.

When you’re looking for a new policy, it’s also beneficial to have a good understanding of whole life insurance policies. This will help you make the right decision when buying insurance.

What is life insurance?

Life insurance is a way to protect your family if you die in your retirement years. The right life insurance policy should pay enough to keep your family financially free when you die.

Only those who are providing financial assistance to other people really need to buy life insurance. For example, if you are single and have no dependents, you may not need to purchase a policy. However, if you are married and have two children, you may need a larger plan.

Those who have life insurance pay monthly. If they die while the policy is in effect, the beneficiaries will receive the payment, which is tax-free.

There are two main types of life insurance: term and whole. As it sounds, term insurance is sold for a short period of time, usually from 10 to 30 years. Whole life insurance is designed to cover you for the rest of your life.

Lifetime annuities are usually cheaper than whole life annuities because you can’t use the policy.

Most consumers don’t need a whole life policy because they don’t need lifetime coverage. For example, if you die in retirement, your beneficiaries will receive all residual income and savings. And since you weren’t making money through your work, you don’t have to pay back your income when you pass.

Some employers offer free or low-cost insurance as a workplace benefit, but the amount can vary. If you leave the company or are let go, the policy will be canceled and you will no longer be covered. It is often better to have your own life insurance policy than your employer’s.

Want to add to your life insurance policy now? Or do you want to start fresh with a new plan? Take action now and get a price estimate today.