Life Insurance Life insurance provides a plan of financial coverage for those who want to leave financial assistance behind for loved ones in the case of untimely death. "Timely" in this case means dying before one's financial obligations and care for others have expired. Life insurance can be bought in a couple of versions depending on a person's position in life. The most common version is term life insurance. Used by many young and middle-aged spouses and parents, this type of coverage provides a financial pay-out to named beneficiaries in the plan if an untimely death occurs with the client. The policy lasts for a term (typically 20 or 30 years) and then ends with no further obligation or service. It is used to provide a safety net for loved ones to cover burial costs and financial support for the first few years of loss. Universal and permanent life insurance plans pay for untimely death coverage but also build a savings component that can be cashed out later in life, so both tend to get pitched as an investment option for seniors. This allows such consumers to then shift from coverage to savings vehicle where the money collected can then be used to live on in the final years when coverage is no longer necessary. While life insurance is not a requirement on people in the U.S., it makes practical sense in families that have loved ones who depend on the client's income. This is particularly true when only one spouse or parent is the sole-income earner for the family. Individuals who are mainly on their own have no practical need for life insurance and are probably better served with bank and market investments if the personal goal is to save money for later years. When calculating a life insurance plan, consumers should anticipate the impact of taxes. Depending how a policy is paid out, the beneficiary could be taxed as receiving income. Spouses have an exception based on estate laws, however, children do not, nor do dependents. As a result, and given the size of many policies, such payouts will be at the highest tax bracket and could eat up one-third of the policy value. Consumers determining how much of a policy to take should figure what the tax impact will be and then add it to what is a reasonable insurance amount. The net of the two should then be the true amount to write the life insurance policy for. Insurance Site .org All Content Copyright 2011 InsuranceSite.org Next - Worker’s Compensation Privacy Policy Introduction Business Vehicle / Auto Property Health Insurance Life Insurance Worker’s Compensation Auto, Home, Life, Health, Business - How Insurance Works