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Life Insurance Basics
There are many things to consider when it comes to getting a life insurance policy that can help protect your family’s future financial needs. Knowing how life insurance works, types of coverage available, why you need it, and how to go about choosing a plan that’s right for you are very important factors.
Why Do I Need Life Insurance?
Burial and Final Expenses: Even a simple funeral can cost thousands of dollars. The National Funeral Directors Association reports that the median price Americans pay for a funeral is about $8,300, as of 2023. That doesn’t even include the price of a vault, something that most cemeteries require, which can be as much as $7,000. Most Americans get life insurance for this reason.
To Replace Income: If you died leaving behind a spouse and young children, it may be hard for them to make ends meet without your income. Money from a life insurance policy can help maintain your family’s standard of living and pay for expenses that go along with raising children. Almost 70% of Americans get life insurance for this reason.
Living Benefits: Many policies have available riders that will allow you to have access to a large percentage of the death benefit while you're still alive if you become terminally, critically or chronically ill. Conditions vary from carrier to carrier.
What Types Of Life Insurance Are Available?
Temporary or Term Policies: Term policies are issued for a specific number of years, often from 5 to 30. Practically all term insurance policies sold to individual consumers are level premium term policies. This type of policy guarantees that your premium will stay the same for a set period of time, which could be the entire term or just a portion. At the end of the term the coverage will cease although most companies will offer to continue coverage at adjusted rates based on the owners age at the end of the term.
Permanent Policies: Two of the most popular types of permanent insurance are whole life and universal life. Most whole life policies provide a level premium, so the rate that you pay stays the same for the entire policy. With most life insurance policies, you can get a larger death benefit by passing a medical exam. Other permanent insurance policies available include universal life and variable universal life. Permanent policies will accumulate a cash value after a certain number of years.
