Life insurance is a topic no one likes to think about … what will happen to my loved ones when I die. But if you have anyone that depends on you financially, then life insurance is a must-have.
Basically, a life insurance policy is a contract between the insured and the insurer (insurance company) that guarantees a lump sum payment to your named beneficiaries upon death. The insurance company promises to pay a death benefit in consideration of the premiums paid by the policyholder.
Life insurance does not put a value on your life but takes into consideration your financial obligations upon death. It helps those left behind cover final expenses, mortgages, outstanding debt, loss of income, and future planned educational needs of your loved ones.
There are two main types of life insurance: term life and permanent or whole life. Term life insurance has a predetermined policy end. Basically, the insurance carrier bases premiums on the probability that the insured will die within the policy period. Typically, these policies are taken for 10, 20, or 30 years. At the end of the policy term, the policy expires. Yes, that could mean that you pay all those premiums and have nothing to show for it, but hey, you are winning at life! Think of life insurance as a risk management tool and not a financial investment.
Permanent life or also known as whole life is based on the same probability calculation of death to determine the premiums, but there is no end date. You pay the premiums and the policy continues until death. These policies tend to be the most expensive and may have a few advantages in building cash value, but this type of policy is not always considered the wisest choice financially. We have over 45 years of experience in the insurance business and can help walk you through all your options to determine what will work best for you and your beneficiaries. It’s important to remember to re-evaluate your life insurance needs annually. Life changes and we will be there to help you find the best policy options for your needs.
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