Life Insurance

What is life insurance?

Life insurance comes in various forms. It is a promise made by an insurance company to pay a death benefit to a beneficiary on the death of the insured, in exchange for a series of premium payments from a policyholder. Typically, the death benefit will be many times larger than any single premium.

What are the benefits of life insurance?

In the most general terms, owning life insurance guarantees that, in the event of the insured’s death, a death benefit will be paid to the insured’s beneficiaries. In addition, permanent insurance provides a cash value component from which cash can be accessed for various financial needs such as college tuition, a down payment on a home, business opportunities and more.

Types of life insurance

Term life insurance typically has the lowest out-of-pocket cost of all life insurance policies. It does not provide permanent coverage, but instead provides a death benefit for a specified period of time (the “term”).

Whole life insurance is designed for permanent coverage on the life of the insured. With a whole life insurance policy, the premium is guaranteed to never increase and the death benefit is guaranteed for life. It also has a cash value component that builds guaranteed cash value that can be accessed for various needs. Whole life insurance may pay dividends to policyholders. Dividends can be used to purchase additional coverage, reduce the premium, pay back loans or may be received in cash.

Universal life insurance (UL) can provide permanent coverage for the life of the insured, and also gives the policyholder a little more flexibility with respect to the timing and amount of premium payments. The cost of insurance is deducted from the policy’s cash value. UL comes in two different forms: Current Assumption UL and Death Benefit Guarantee UL.

Who needs life insurance?

Everyone needs life insurance, if only to pay final expenses. People with children, or other family members that are financially dependent on them, may need more life insurance than those with other needs or goals. Perhaps the best way to determine if you need life insurance is to ask yourself: “Financially, would my family be able to live tomorrow as they do today, if I were no longer around?” If your answer is no, then you probably need life insurance.