Life Insurance

Life Insurance

Usually it's not about how much life insurance you need. It's just how much money your family will need after you have left. When buying a life insurance policy, it's important to choose the right amount of coverage. You don't want too much, you don't need to pay for the protection. Neither do you want too little to leave your loved ones under-protected.

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What Is Life Insurance?

A life insurance policy is an insurance company contract.

The insurance companies offer a lump-sum payment, known as a death benefit, to beneficiaries upon the death of the insured, in exchange for premium payments.

Life insurance is typically selected based on the owner’s needs and goals.

Term life insurance generally offers protection over a specified period, while permanent insurance provides lifetime coverage, such as whole and universal life.

It is important to note that death benefits from all life insurance types are normally tax-free on income.

Who Should Buy Life Insurance?

Life insurance provides financial assistance after an insured's death to surviving dependents or other beneficiaries.

So here are a few examples of individuals who might need life insurance:

  • Parents with minor children – If a parent dies, financial hardship could result from the loss of their income or care giving skills. Life insurance can ensure the children have the financial resources they need until they can support themselves.
  • Parents with disabled adult children – For children who need lifelong care and never will be self-sufficient, life insurance can ensure that their needs are met after their parents pass away. The death benefit can be used to fund a special needs trust that is managed by a fiduciary for the benefit of the adult child.
  • Joint owner adults – Married or not, if one adult 's death means the other can no longer afford loan payments, maintenance, and property taxes, life insurance may be a good idea. An example would be a committed couple who had taken out a joint mortgage to purchase their first home.
  • Elderly parents who want to leave money to adult children who provide their care – Many adult children sacrifice to caring for an elderly parent who needs help by taking time off work. This assistance may include direct financial support, too. Life insurance can help reimburse the adult child’s costs when the parent passes away.
  • Young adults whose parents incurred private student loan debt or cosigned a loan for them – Young adults without dependents rarely need life insurance, but if, after their death, a parent is on the hook for a child's debt, the child might just want to carry sufficient life insurance to pay off that debt.
  • Young adults who want to lock in low rates – The healthier and younger you are, the lower your insurance premiums. A 20-something adult could buy a policy even if they do not have dependents if they are expected to have them in the future.
  • Wealthy families who expect to owe estate taxes – Life insurance can provide money to cover the taxes and keep the entire estate value intact.
  • Families who can’t afford burial and funeral expenses – A small life insurance policy can provide the money to honor the passing of a loved one.
  • Organizations with key employees – If a key employee 's death, such as a CEO, would create a serious financial hardship for a company, that company may have an insurable interest that will enable it to purchase a life insurance policy on that employee.
  • Married pensioners – Rather than choosing between a spousal and non-spousal pension payout, pensioners can choose to accept their full pension and use some of the money to purchase life insurance to benefit their spouse. That strategy is called the maximization of the pension.

How Is Cost Determined?

Insurers use rate classes, or categories related to risk, to determine your premium payments; however, these categories do not affect the length or amount of coverage.

Several factors, including overall health, family medical history, and lifestyle, determine your rate class.

For example, tobacco use would increase the risk and hence cause your premium payment to be higher than someone who doesn't use tobacco.

One important decision is to determine the right insurance coverage for your needs.

A professional can analyze how changing economic and personal situations can affect you, providing you with timely financial information – which will ultimately help you select the investments that suit your needs.

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Our mission is to help you achieve your goals by showing you ways of protecting what's important to you, investing in your future, and preparing for your retirement.

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