What is Life Insurance?
Purchasing life insurance gives you a chance to provide a safety net for your loved ones in case you were to pass away. A life insurance policy is a contract that says as long as your premium is paid and the policy is active when you die, your beneficiaries will receive a death benefit payout that they can use however they would like such as for final expenses, paying off debt, and even everyday living costs.
Life insurance generally falls into three categories:
- Term Policies: These are typically set in a timeframe (1,10, 15, 20, or 30 years) and are very affordable. This type of policy is used to support your loved ones in case you were to pass away unexpectedly.
- Permanent Policies: This policy lasts for your entire lifetime and have a cash value that grows but is more expensive.
- Final Expense Policies: This is a more affordable type of permanent life insurance that has a lower death benefit designed to cover your end-of-life costs.
When it comes to picking a life insurance policy that is the best for you, it is important to consider your budget and reasons for needing life insurance.
Term Life Insurance
This policy only lasts as long as you need it to. This makes it more affordable and the most popular choice.
*Since the cost is lower, you can afford a larger death benefit and greater security for your family/loved ones.
*The policy length gives you the freedom to choose your length of coverage. You can match the years left on your mortgage or the years your children will be dependent.
*The payout your beneficiaries claim will not be counted as taxable income.
*Your death benefit and premium are fixed and guaranteed as long as payments are made on time and there is no life insurance fraud.
Final Expense Insurance (Burial Life Insurance)
Also known as burial insurance, covers end-of-life expenses such as funeral arrangements and any remaining medical or legal expenses that will need to be settled by your beneficiaries.
It is beneficial if:
*You are between the ages of 50 and 85.
*You want a policy that is affordable.
*You only want your funeral and other final expenses covered.
Benefits of FEI:
*No medical exams are needed unless you have a serious pre-existing medical condition
*Lower premiums that start at $53 per month
*Quick approvals that can be completed in days and then the coverage will start immediately.
Short-term (one year) Insurance
One year coverage makes sense if:
*You want to try out life insurance
*You only want or need temporary coverage
*You're in between jobs and temporarily without employer-provided coverage
-No medical exam is needed meaning you can get your policy in minutes after you answer some basic health questions.
-Low Cost, it starts at $7 a month.
-Coverage for your loved ones ranges between $50,000 and $200,000 if you were to pass away
Whole Life Insurance
Whole life is a type of permanent life insurance that provides lifelong coverage with a guaranteed rate of return and premiums that are typically locked-in as long as all of your premiums are paid on time.
It makes sense if:
*You want to be covered no matter when you pass away
*You want the cash value feature and the option to take out a life insurance loan
*You want a fixed premium and hands-off cash value growth
You will have:
*Lifetime coverage that lasts until you pass away as long as your premiums are paid on time.
*Guaranteed growth that builds tax-deferred cash value over the life of your policy
*A tax-free payout that provides a lump-sum, tax-free benefit to your beneficiary
It Covers:
*Estate planning
*Retirement
*Funeral and burial costs
*Inheritance funds
Universal Life Insurance
This policy is permanent but offers flexibility to change your death benefit and adjust your monthly premiums. It lasts for your entire lifetime and builds cash value.
It makes sense if:
*You want to be covered no matter when you pass away
*You want the potential of a zero-cost policy or an adjustable premium
*You want the benefit of cash value and can afford the higher fees and risks associate with universal life's cash value growth set up
It Covers:
*Tax-free growth so that the pay-out to your beneficiaries is tax-free
*Loan collateral so you can borrow money from your insurer using the cash value as collateral, your policy loans are subject to interest rates though and are set by your insurer.
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