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Life Insurance
What is Life Insurance?
Whether you are married with children or single, life insurance is an important tool to use to protect your financial future. Before deciding if you should this insurance, you should first understand its purpose and the benefits it provides individuals with.
The purpose of life insurance is to protect the insured's beneficiaries when the individual dies unexpectedly. In exchange for monthly insurance premiums today, the insurance company will pay out a lump-sum of money when the insured dies.
In order to properly calculate how much premium to charge, the insurance company has to know several factors about the insured. These are the age, gender, previous health history, family health history and the policy limit. With these pieces of information, the insurance company can calculate the likelihood of the insured dying. This provides the number of years the company can expect to collect an insurance premium from the individual.
Life insurance typically can be purchased in two forms:
- Term Insurance – term insurance is the more affordable option for life insurance for short-term foals. When an insured is young, the insurance premium is very inexpensive. However, as the insured grows older the insurance premium increases. In addition, once the policy term has been reached, the insurance company will no longer provide insurance to the insured.
- Whole Life Insurance – this type of insurance does cost more than term insurance, but the premiums remain fixed for the life of the policy. Once the insured has finished paying all the insurance premiums, the insurance contract will remain in force until the insured dies. One key component of whole life insurance is the cash value of the policy. Part of the insurance premiums that you pay each month become part of the cash value of the policy. The cash value is part of the death benefit and while the insured is alive, most insurance companies allow the policy owner to take loans from the cash value if the need arises.
Life insurance can be a very powerful tool if properly structured. If you are interested in including insurance as part of your financial future, then you should contact an agent today.