Life Insurance: An Overview

Life insurance is an insurance policy that pays out to a policyholder’s named beneficiaries when the policyholder passes away. The policyholder makes monthly payments (or one lump payment) on the policy, with the cost based on the size and scope of the policy. This type of insurance appears complex at first, so you may be asking yourself: What do I need to know about life insurance? By understanding the basics, you can ask a policy provider the right questions and make an informed choice.

The Different Policies

Different types of policies are available; here is what to know about life insurance policies.

  • Term Life: A term life policy lasts for a set number of years. These terms are usually 10, 20, or 30 years. Types of term policies include decreasing terms, in which coverage decreases over the life of the policy at an agreed-upon rate; convertible term policies, which can be converted into a permanent policy; and renewable term policies, with a premium that slowly goes up over the life of the policy.
  • Permanent Life Insurance: These policies are designed to last for the lifetime of the policyholder, unless you cancel them or stop paying. Different types of permanent policies include whole life, which accumulates in value and offers financial benefits; universal life, which has a cash value component that also gains interest (plus the policy can be adjusted over time); indexed universal policies, which let you earn a fixed or indexed rate of return; and variable universal policies, which allow you to invest the cash value (these policies can also have the premiums adjusted).

What Affects Policy Costs?

The cost and premium of your policy are affected by several factors, which include your age, health history, gender, driving record, tobacco use, lifestyle, and family history. For example, if you work in a risky industry, have dangerous hobbies, or have a family history of certain ailments, these can affect your policy quotes.

The Need for Life Insurance

So, who needs life insurance? The answer is that lots of people do. If you have anyone you want to support when you pass away, a life insurance policy can help you do that. If you have young children or children with health needs, if you own property with a spouse, or if you want to ensure you leave enough money to settle your debts when you pass, a life insurance policy can give you peace of mind and the financial coverage you need to help those you care for.

Read More