Life Insurance
Life insurance is a contract between you and an insurance company. You make regular premium payments to the life insurance company. In exchange, the company pays a death benefit to your beneficiaries when you die.
There are basically two types of life insurance: term life and permanent life. Term life covers you for a fixed amount of time while permanent life insurance covers you until the end of your life.
Generally, term life insurance is less expensive to purchase than permanent life. However, permanent life policies, like whole life insurance, build cash value over time and don’t expire, if you’ve paid your premiums. Term life policies have no value if you outlive the contract.
Your life is valuable. Let’s protect it.
What is Life Insurance?
Originally designed to help cover burial costs and care for widows and orphans, life insurance is now a flexible and powerful financial product. More than half of Americans have some sort of life insurance, according to insurance research organization LIMRA.
Life insurance can be issued as either an individual or group policy.
Life insurance terminology
Life insurance policies can differ widely. There’s life insurance for families, high-risk buyers, couples and many other specific groups. Even with all those differences, most policies have some common characteristics. It’s important to consult with your agent to understand all details.
Premiums are the payments you make to the insurance company. For term life policies, these cover the cost of your insurance and administrative costs. With a permanent policy, you’ll also be able to pay money into a cash-value account.
Beneficiaries are the people who receive money when the covered person dies. Choosing life insurance beneficiaries is an important step in planning the impact of your life insurance. Beneficiaries are often spouses, children or parents, but you can choose anyone you like.
Death benefit refers to the total amount of money the beneficiaries will be paid when the covered person dies. You choose a cash value when you buy a policy, and the amount is sometimes — but not always — a fixed value. Permanent life insurance can also pay additional money if the cash account has grown and if you select certain options for your policy.
Riders are options you can add to a life insurance policy. You might want your premiums covered if you’re no longer able to work, or maybe you’d like to add a child to your policy. By paying for a rider, you can add those and other features to your policy.
Who needs life insurance?
Like all insurance, life insurance was designed to solve a financial problem. Life insurance is important because when you die, your income disappears. If you have a spouse, kids or anyone dependent on you financially, they’re going to be left without support.
Even if no one depends on your income, there will still be costs associated with your death. That can mean your spouse, child or relatives will have to pay for burial and other end-of-life expenses. As you think about the amount of life insurance coverage you need, consider your beneficiaries and what they’ll need.
Life Insurance can also be a great gift for children and grandchildren. Get their planning jumpstarted by helping starting their permanent policies when the cost is low.
How much life insurance do you need?
Every situation is different, and every life insurance policy is as well. If you’re just covering end-of-life expenses, you won’t need as much as if you’re trying to replace lost income. For this reason you should consult with your life insurance agent so that you can determine how much coverage and which types of polices are most suitable.