Everything You Need to Know About Life Insurance.

There is a great deal of information available about life insurance, but you do not need to know all of it to get started.

The basic premise is simple: life insurance gives you peace of mind while you are alive and financial support for your loved ones when you are gone. It is something you should have if people in your life depend on you for daily expenses, college tuition, or retirement income.

Life insurance can make a major difference for you and your family, not only financially but emotionally as well. Purchasing a policy sooner also gives you more options and flexibility and improves your future financial security.

Do I Need Life Insurance?

Most likely yes. Especially if someone depends on you for financial support.

How Does Life Insurance Work?

Life insurance is a contract between you and an insurance company. You make regular payments, called premiums, and in return the insurer pays a tax-free sum to your beneficiaries when you die.

Some policies offer additional benefits you can use during your lifetime, such as access to accumulated cash value, which can cover expenses such as college tuition or a down payment on a home. However, using cash value reduces both the available surrender value and the death benefit. In the event of a terminal illness, it may also be possible to receive part of the death benefit early to cover medical needs.

Which Type of Insurance Is Most Suitable?

There are various life insurance policies, but they fall into two main categories: term life insurance and permanent life insurance. The best option depends on your particular needs, and in some cases a combination of both products may be the ideal solution.

Term life insurance provides a death benefit for a specified period, generally 10 to 20 years. It is a straightforward option and is often the first choice for most people. Some term life policies can be converted to permanent policies in the future, which is advantageous if your circumstances change and you need more protection.

Whole life, universal life, and variable universal life insurance, on the other hand, offer long-term coverage. Whole life insurance, for example, provides permanent protection. Some of these policies offer stronger guarantees than others and may allow you to increase the cash value accumulated in your policy.

How Much Coverage Do I Need?

It depends on your stage of life and who depends on you financially. When starting a family, you will probably want enough to replace your income so your spouse or partner and children have the support they need. Later, once your children are grown and your home is paid off, you may want to reassess how much life insurance you have and focus on final expenses, outstanding debts, and the legacy you would like to leave your loved ones.

How Much Does It Cost?

The cost of life insurance depends on several factors: age, gender, health, lifestyle, and occupation. Whatever your budget, a financial professional should be able to find a solution that meets your needs at a price you can afford.

Life Insurance Terms You Should Know.

Cash Value

The amount of money that accumulates in a whole life policy as you pay premiums. You can access it through loans or partial withdrawals for various financial needs, such as unexpected expenses or your child's college tuition. This money grows tax-deferred.

Beneficiary

The person or entity that receives the benefit amount when the insured person dies.

Convertibility

A benefit provided by some companies that allows you to switch from a term life policy to a whole life policy if your life changes, without undergoing additional medical exams.

Riders

An add-on, generally available for purchase, that you can choose to include in your policy to further customize coverage.

Policy guarantees are based on the issuer's claims-paying ability.