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Life Insurance

"What is life insurance?"

More than 5 million people type that question into Google every day. If you don't have an answer, you're not alone!

The short answer is that life insurance is a financial product, a tool you can use as part of a retirement planning strategy. It's unlike your health insurance or car insurance because it only pays a benefit after the death of the insured person.

That's why many of us don't like thinking about life insurance, let alone buying a policy. But when you understand the incredible benefits life insurance can provide for your family, it becomes much less scary. In fact, it's easy to see what a smart financial move you're making.

Let's start with a few facts:

  • 7 out of 10 American households own some form of life insurance
  • 58 million (approximately half) of American households say they need more insurance

This means that 70% of American households are preparing for the future in a smart, manageable way. Are you one of them?

The first step in any smart purchase is to educate yourself, and it's no different when it comes to insurance. We will go through the three main types of life insurance: term, whole, and universal.

Term Life Insurance

 Term life insurance meets most buyers' needs. As its name  suggests, it provides coverage for a particular term, or  length of time. In return for choosing a select period of time for your coverage, your payment stays the same throughout the term. At the end of the term, your policy will expire. It's up to you to purchase another policy to keep your coverage active. Because it's a limited-term policy, this is an affordable option that works for most families.

Happy couple in front of their home

 A second kind of term life insurance is return of premium  life insurance. As its name suggests, "return of premium"  insurance actually pays you back. If you're alive at the end  of your term, the insurance carrier will refund all of your payments. The net cost to you is, in effect, zero. The one caveat with this type of policy is that this type of security costs more—often as much as three times more than term life insurance.

Whole Life Insurance

Whole life differs from term life insurance because it isn't limited by a particular time period of coverage. Like its name implies, it covers you for your whole life. Because of this, it's more expensive than a term policy. Yes, there are benefits to this extra expense! This kind of policy is guaranteed to pay out. It's guaranteed to earn interest at a fixed rate. It's also guaranteed not to cost more as you age. Your payments, called the "premium," will never increase, no matter how healthy or unhealthy you are. If you're the sort who avoids risk, this might be the policy for you. To keep your policy in effect, all you have to do is keep making your payments.

Did you know...
95 million Americans
have no life insurance?

Another kind of permanent life insurance is called variable life. It still guarantees a payout (called a "death benefit," since it happens when the insured passes away). And you still pay the same guaranteed rate every month, no matter your health condition. So where does the "variable" part come in? Think of this type of insurance as an investment tool. Instead of a guaranteed interest rate at which your policy equity grows, you have the option to invest the money you've paid. If you're the type who likes to manage your money yourself and can deal with a bit of risk in your financial portfolio, this might be a good option for you.

Universal Life Insurance

Happy couple in front of their home

Universal life insurance is a type of policy that gives you an incredible amount of freedom. If you don't want to pay the same amount each month, for example, you can customize a payment plan. The power is in your hands—but you know what they say about power: it comes with a lot of responsibility. Universal life insurance is no different. Your insurance advisor will work with you to come up with a suggested payment plan, but making those payments are all up to you. Essentially, you choose how much you want your policy to be worth. You can change this amount at any time. The trick is to know how much coverage you need, how much you have available to pay into the account, and how to space out your payments. Because of this flexibility, this type of policy costs more than term life insurance, but less than whole life insurance.

Another interesting type of universal life insurance is called cash value. As its name suggests, this type of police creates a cash value that accrues interest and grows as you pay into the policy. This is your money, and you can borrow against it or withdraw from the account. You can also cancel the policy at any time and the account's cash value will be returned to you.

More Insurance Solutions

Because everyone's financial situation is different, we offer a number of other types of insurance that don't quite fit into the previous three categories. These solutions work well for small businesses, people with high-risk habits like smoking or skydiving, and seniors. Insurers have designed specific policies to accommodate the kinds of risk presented by people who might be unhealthy, have dangerous jobs, or who might not live for the 20 or 30 years often selected in a term life policy. Call one of our Agents to find our more today!

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