It's important to understand how life insurance works before you decide to give it as a Christmas gift to a family member. Life insurance pays the beneficiaries when a covered policyholder passes away. It ensures that a family is able to meet their living expenses in the absence of their breadwinner.
Nonetheless, it's kind of a complicated gift because it requires permission from beneficiaries before they can be included in the plan. In other words, it can't be a traditional holiday surprise. Your beneficiaries will have to sign paperwork and take a medical exam to give the insurer data on how to set rates.
Another dimension to life insurance is choosing the right type of plan that makes sense for your family. The three main types of life insurance are term life, whole life, and universal life insurance. Term life is the cheapest form of life insurance but only issues payouts during a specific period.
Individuals with high income often select the more extensive and expensive coverage known as whole life insurance. This plan operates more like a growing investment over time that the policyholder can tap into for paying bills while alive. Universal life insurance is similar to whole life since it builds cash value, except it provides more flexibility in payment options.