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Life Insurance Basics
A life insurance policy is a contract between you and an insurance company that provides your named beneficiaries with a death benefit payout upon your death. In most cases, you pay for your life insurance coverage with monthly premiums, which are calculated based on the size of your policy and other factors.
Who Needs Life Insurance?
If anyone depends on you financially, you may want to consider purchasing a life insurance policy. Life insurance is designed to lessen the financial burden left to family members after the policyholder's death. Life insurance death benefits are commonly used to:
- Pay for funeral and burial expenses
- Continue making mortgage payments
- Pay off debts
- Pay medical bills
- Support a business
- Set up an inheritance
- Pay estate taxes
- Maintain a family's standard of living
Types of Life Insurance
There are two main types of life insurance: term life insurance and permanent life insurance.
Term life insurance covers you for a set amount of time (or term). These terms are usually set in five-year increments, and typically last up to 30 years.
Term life insurance is popular among those who want to protect their loved ones during crucial periods, such as when your children are growing up, and eventually heading off to college.
With a term life plan, though, your beneficiaries won’t receive death benefits if you die after your term has expired.
Permanent life insurance, on the other hand, allows you to maintain coverage as long as you pay your premiums. Additionally, these policies accrue tax-deferred cash value, which you can use to secure a loan for yourself, among other benefits.
If you are an older adult and require a life insurance policy to cover your end-of-life costs, such as your funeral and burial expenses, a final expense insurance policy is another option worth considering.
Final expense policies are typically available to people in an older age bracket (50-85 for example). Some final expense policies are guaranteed-issue — they do not require you to take a medical exam or answer any health-related questions. They have a much lower death benefit value than fully underwritten plans ($25,000 or less). These plans may have a graded death benefit for an initial period of time.
In general, term life insurance is less expensive than permanent life insurance policies. So if you only need coverage for a specific period of time, a term policy may be your best bet.
However, your policy's costs can be impacted by a number of factors, including:
- Your age
- Your health
- Whether you engage in risky hobbies
- Your family's medical history
- Your medical exam results (if required)
Typically, insurance companies require you to take a medical exam before they will sell you a life insurance policy. The results of your medical exam help the insurer gauge how big of a financial risk you are to insure. Generally, the younger you are when you apply for a policy, the more likely you are to be approved for coverage and the more affordable your monthly premium will be.
Speak With an Agent
A licensed agent can help match you with a life insurance policy that makes sense for you and your family. Speak with a licensed agent now at 1-800-966-7169.
*Applications for insurance may be subject to acceptance by insurer. Rates and coverage amounts will depend upon the carrier selected.