Life Insurance FAQs
Here are answers to the most common questions about life insurance.
Life Insurance Options
Let’s be honest: Growing old is not the only reason people die. Buying life insurance while you’re young and healthy is a way to protect your finances, regardless of how long you expect to live. Additionally, by buying now, you may be able to lock in lower rates, even if you experience health issues later. And if you choose permanent life insurance, which accumulates cash value, the sooner you buy, the more time you’ll have for that cash value to grow and be used at any age, for any reason.
To help you decide, ask yourself four questions: 1) Why do I need life insurance? 2) How much coverage do I need? 3) What is my budget? 4) What are my other financial priorities?
At a minimum, you’ll want to leave your loved ones enough to pay any debt you’ll leave behind as well as all expenses associated with the end of your life (funeral, burial, medical). If you have people who depend on you (partner, kids), you’ll also want to consider how much they will need to help maintain their current lifestyle without your income.
There can be, particularly with permanent life insurance. Permanent life insurance is a financial asset that grows tax deferred. Generally, because death benefits are not considered income, beneficiaries are not taxed on a life insurance payout.
Terms and Definitions
People buy life insurance so if they die, their family or loved ones will receive money that can help cover funeral costs, pay off debts and/or help maintain the way they are living today. When a person dies, the life insurance company pays the death benefit to the listed beneficiary. The two most common types of life insurance are term life insurance and permanent life insurance.
Term life insurance provides a death benefit only if the insured person dies during a set period of time (say 10 or 20 years). Once that term expires, no death benefit is available.
Whole life insurance is a type of permanent life insurance that has a fixed premium—or payment amount—for the life of the policy. This type of policy builds cash value that the policyowner may be able to use while alive.
Buying Life Insurance
You may get an accurate quote online, but the coverage may not be what you really want or need. Online life insurance quotes are based on algorithms that can’t process the many details that determine the type and amount of insurance you need. That’s why it’s important to talk to a real person who will ask the right questions to help ensure you get the right policy at a cost you can afford.
Generally speaking, the monthly cost of life insurance is probably far less than you spend on your cell phone or cable TV.1 Determining your specific cost will mean looking at your unique situation (your age, health, occupation and more) and the type of policy you choose (term or permanent, amount of death benefit, etc.).
You’ve already taken the first step by doing some research. Next, talk with one of our experts, who will take time to get to know you and carefully understand your priorities and budget before presenting you with options and pricing for coverage.