What is Life Insurance?
Life insurance is an agreement between an individual and an insurance company. The insured pays a designated premium to the insurer. When the insured dies, the insurance company pays the beneficiary a preset amount of money. Life insurance is designed to protect your family or other individuals who may need financial assistance after your death.
Related: Who Should Buy Life Insurance?
Life Insurance Glossary of Terms
- Beneficiary: The person who receives the death benefit upon the death of insured.
- Insured: The person whose life is insured under the life insurance policy.
- Insurer: The insurance company that pays out the death benefit.
- Premium: The amount that you pay for your life insurance company – typically once per month or once per year – in exchange for your life insurance policy coverage.
- Face Value: The dollar amount equated to the worth of your policy.
- Dividends: A yearly payment granted to an insurance policyholder, often from a permanent life insurance or long-term disability policy.
- Lapse: The removal or expiration of a privilege, right, or policy due to inaction. This occurs when the party that is to receive the benefit does not fulfill the conditions or requirements set forth by a contract or agreement.
Life Insurance Coverage
What are the different types of life insurance coverage?
Term Life Insurance
Term life insurance is designed to cover for a specific period (e.g. 30 years) which and pays a benefit in the event of the death of the insured during that time period. This type of life insurance provides coverage at a fixed rate of payments for the relevant term. After the period expires, coverage is no longer guaranteed, and the client must either forgo coverage or potentially obtain further coverage with different payments and conditions.
If the insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is usually the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period.
Whole Life Insurance
Whole life insurance is provides coverage for a person’s whole life as long as the scheduled premiums are maintained. All whole life policies build up cash values. Most whole life policies are guaranteed if the scheduled premiums are maintained. The variable in a whole life policy is the dividend, which could vary depending on how well the insurance is doing. If the company is doing well and the policies are not experiencing a higher mortality than projected, premiums are paid back to the policyholder in the form of dividends. Policyholders can use the cash from dividends in many ways. The three main uses are: to lower or vanish premiums, to purchase more insurance, or to pay for term insurance.
Universal Life Insurance
Universal life insurance is a flexible premium life insurance policy under which the policy owner may change the death benefit from time to time and vary the amount or timing of premium payments. Premiums are credited to a policy account from which mortality charges are deducted and to which interest is credited.
Final Expense Insurance
Final expense insurance is a type of life insurance that covers burial and funeral expenses. Final expense insurance can save your loved ones money and stress at the time of your death. With the high cost of funerals, the last thing anyone wants to think about after they lose a loved one is paying for and planning final arrangements.
Life Insurance Costs
Premiums and Costs
The cost of life insurance rates can vary significantly among applicants. These rates are based upon the insurer and type of policy, among other factors. According to Quotacy, the average cost of life insurance is $27 per month. This price is based upon a 20-year, $500,000 term life policy, for a 40-year-old.
How Much Life Insurance Should I Buy?
There is no way of knowing how much life insurance you should take out. But if you consider your standard expenses, you can come up with a reasonable number. You will want to factor in outstanding debt amounts, end-of-life costs and funeral expenses, and day-to-day expenses of beneficiaries.
Read More: How Much Life Insurance Do I Need?
Benefits of Life Insurance
Feel confident in your retirement
Life insurance can offer additional funds to supplement your retirement income so you can spend time doing what you enjoy most.
Protect your loved ones
Life insurance ensures your loved ones can survive financially by replacing income and paying off debt.
Provide for your family even when you’re gone
Life insurance can provide an inheritance to those you care for. You can do this while incorporating benefits such as long-term care to protect yourself.
Prepare for the unexpected
Life insurance can provide security when life doesn’t go as planned. Policies can earn cash value, supply a death benefit, and more.
The death benefit of a life insurance policy is tax-free. Those in positions of wealth can purchase permanent life insurance within a trust to help pay estate taxes that are due upon death. This will help preserve value in their estate for future generations.
Read More: 5 Reasons to Buy Life Insurance
How to Buy a Life Insurance Plan
Our approach to helping you select a suitable life insurance policy begins with a meaningful conversation to understand and address your individual needs. We spend time educating you on how various policies work, and how each might apply to your unique situation
After our initial discussion, we review your situation and needs to determine the proper policy and coverage amount for you. Our goal is not to sell you a life insurance plan right away, but to work with you to ensure your policy selection is an appropriate fit.
Once we’ve determined that the policy meets your needs, you’ll complete the application process with assistance from our experienced life insurance advisors.
Enjoy the peace of mind that comes with ensuring that the people and things that are important to you are protected. You can rest assured knowing that, if life changes or questions arise, you have a support team to help you along the way.