Life Insurance

What is Life Insurance?

Life insurance is a contract between an insurance company and a policy owner that promises to pay a specified amount of money to one or more beneficiaries when the policyholder dies. The policyholder will typically pay the premium to the insurer during their lifetime in exchange for the beneficiary’s payout.

Why have Life Insurance?

A life insurance policy should be a consideration if people you love depend on your income and would feel economic hardship without you. Regardless of whether or not you are the primary earner, life insurance can be used to solve several personal and business financial issues. Personal use could be survivor protection including: medical costs, funeral expense, legal fees, probate costs, court costs, executor’s fees, and any unpaid taxes. A life insurance policy can also be used to protect loved ones from outstanding debt including student loans, auto loans, mortgage, business, or personal loans with co-signers.

What are the types of Life Insurance?

• Term Life Insurance – Term L.I. lasts for a set period of time and pays a benefit if the policyholder dies before the term has expired. Term policies typically last for 10, 20, or 30 years.
• Permanent Life Insurance – Permanent insurance is more expensive than term because it stays in force throughout the insured’s entire life unless the policyholder stops paying the premiums or surrenders the policy.
• Whole Life Insurance – A policy where the premium and the death benefit generally remain the same each year. Whole life insurance typically has a “cash value” component which is similar to a savings account. The cash value account allows the policyholder to use the cash value for withdrawal or to pay policy premiums.
• Variable Universal Life – VUL allows the policyholder to invest the policy’s cash value in a separate account designed to maximize gains.

How much Life Insurance do I need?

There are several simple ways to calculate how much life insurance you’ll need. One of the easiest is multiplying your annual income by 10. Add an extra $125,000 for each child dependent.

How are death benefits paid?

Unless the beneficiary elects to to take the benefit as an annuity or in installment payments, the death benefit is paid out as an income tax-free lump sum. A death benefit can also be split amongst beneficiaries.

Will my premiums change over time?

Two types of life insurance policies provide level premiums for the life of the policy, level term and whole life insurance. However, the cash value portion of a whole life insurance policy can be used to pay down the monthly premium.

Do I need to take a physical exam?

Case by case. Tables of actuarial data are available to insurance underwriters. In many situationss it may be in the policyholder’s best interest to have a medical evaluation done. Often times the process of having a medical exam is so efficient the examiner comes to your home. People in good health who don’t smoke almost always get the lowest rates. The younger you are the less likely you’ll need a medical exam.

What if I’m late on a payment or can’t pay?

Term policies typically have a grace period after the due date (usually 30-days) during which you can pay premiums without losing coverage. After the grace period coverage will lapse. A whole life policy has more options. If the cash value has grown enough it can be tapped into to keep premiums up to date.

Who can be the beneficiary?

Almost anyone can be named as a beneficiary including a family member, a friend, a business partner, or a charitable organization. There are certain rules regarding common property states and minors.

Can I change my beneficiary?

Yes, if the policy is revocable. If the policy is irrevocable you cannot change them without their consent and the death benefit must go to that person if they are still alive.

How much will the policy cost?

Policy pricing varies by the type of policy and insurance company, the amount purchased, the age and health of the policyholder. An easy to use calculator to give you a helpful start can be found here.  

Simple Life Insurance Calculator

How do I select the right life insurance company?

The typical metrics we use to select a business or product apply to life insurance companies. A company with high financial strength, high customer satisfaction, and low customer complaints is usually a good start. From there the insurance industry has specific companies that independently monitor their performance such as A.M. Best, Moody’s, and Standard and Poor’s.