What is life insurance and which policy type is best for me?
Life insurance is a policy agreement between you and the insurance carrier who is covering the insured in the event of their demise. This is one of the only policies that when gotten, if kept, is certain to be collected as death is certain. The purpose however, is to financially protect and help to replace the person’s revenue lost and protect loss of assets and maintain lifestyle to a the insureds beneficiary (typically spouse, child or family).
When a person dies, the family or the person(s) receiving the death benefit from the insurance company, uses the money how they wish but typically pays for the funeral costs and final expenses.
How Life insurance pays
Let’s meet Andy a 40 year old male who has a wife and three kids ( two young and one entering collage) living in a suburb in Tampa.
Andy was young and had a mortgage, day to day bills, paying for their kids education, and so on. He may have been an employee with income, or a business owner as his income stream, while his wife Marsha is a stay at home mom.
One day Andy has a heart attack. He can no longer work and fortunately has a disability and critical illness policy that keeps them going while he is recuperating. Six months later however Andy has another episode of the same and unexpectedly passes.
Having a life insurance policy could cover all those expenses and the family can continue on financially the same standard of living they had before. In fact if the person was a business owner the money, life insurance could be used to hire someone to keep the business going for the family.
In this example, it happens all too often, so where would they have been without coverage?
Not having life insurance, the family would have had to incur expenses such as the funeral arrangements in the thousands of dollars, lose main source of income from the breadwinner, have no further way to pay for the kid’s education or pay the mortgage and sell the house. The situation would be far worse, further disrupt everyone’s lives and direction, perhaps even bankruptcy.
There are two types of Life insurance plans:
- Term Life the most stripped down and basic policy because it pays for a lump sum cash benefit to the beneficiary upon death of the primary insured. It is the most affordable and has no bells or whistles.
- The other policy is called Permanent Life insurance. These come in many different types such as Whole life, Universal life, and Variable life and so on. The biggest difference is that they add on a cash value to the policy that grows like an investment vehicle that the insured can borrow against. The policy may or may not offer the best value to the client since the dollars saved from a term policy can be used in a specific investment vehicle outside the life insurance policy. Asking many agents will get many answers and opinions, so it is best to weigh out both sides and do what is best for you. Different stages in life of where you first get your policy might change later in life and so as your responsibilities lessen so may your policy needs.
Find out more, if you have questions by contacting us should you need a review of your existing plan or whether your looking for life insurance for the first time. Begin quote now.