The Basics of Life Insurance
What is the definition of life insurance?
Life insurance is a contract with an insurance company to provide financial protection against losses if you pass away. You pay premiums to keep the policy active, and in return, the company pays death benefits to your named beneficiaries if you die while the policy is active. These benefits are generally income-tax-free.
How do I know how much life insurance I need?
There’s no universal answer for determining the right amount of coverage. It depends on your financial situation and goals, such as covering final expenses, estate liquidity, paying off debts, or replacing income. Talk to one of our licensed insurance agents to determine the coverage that meets your needs.
What does life insurance cover?
The primary purpose of life insurance is to protect your loved ones from financial hardship after your death. Additionally, death benefits, typically tax-free, can cover debts, funeral costs, taxes, lost income, and provide a financial legacy for beneficiaries.
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Types of Life Insurance
Do I need life insurance?
Most people need life insurance. Single individuals may require minimal coverage for final expenses, while those with dependents should consider coverage to maintain their loved ones' standard of living. Life insurance can also help with estate taxes and other expenses.
Are there different types of life insurance?
Yes, options include term life, whole life, and universal life policies. Term life provides coverage for a specific period, while whole and universal life include lifetime coverage and a savings component. Life insurance can also support retirement planning or protect children's insurability.
Is there life insurance to cover a mortgage payment?
Mortgage protection insurance ensures mortgage payments are made if you die prematurely, preventing loved ones from losing their home. Some policies also include disability or critical illness coverage.
Life Insurance Financials
What is the cost of life insurance?
Life insurance is more affordable than most expect. Costs depend on age, health, policy type, and selected features.
How are life insurance premiums determined?
Premiums vary based on factors like age, health, policy type, and whether the coverage is term or permanent.
Are life insurance premiums tax-deductible?
Premiums for individual policies aren’t tax-deductible. However, death benefits are usually tax-free to beneficiaries.
How can I use life insurance to save for college?
Permanent life insurance policies build cash value over time, which can be used to pay for college expenses.
Life Insurance Approvals
How long does it take to get approved for life insurance?
Approval times vary based on underwriting, ranging from immediate to several months.
What are some common reasons life insurance claims are denied?
Claims can be denied for non-payment of premiums, misrepresentation on applications, or suicide within the policy’s early years.
Is it possible to get life insurance with diabetes?
Approval depends on the severity of the condition. While coverage is possible, premiums may be higher.
Can I use life insurance to pay for long-term care?
Permanent life insurance policies build cash value over time, which can be used to pay for college expenses.
Even More
How can I use life insurance to fund retirement?
Whole life and universal life policies allow you to build cash value over time. Indexed Universal Life (IUL) policies can also grow with market index potential, offering tax-deferred growth for retirement.
What happens when term life insurance expires?
You can often extend or convert a term policy to a permanent one, but premiums will increase based on your current age. Consult your agent for options.
Can I get life insurance if I have a critical illness?
You can’t purchase coverage for a diagnosed critical illness, but buying a policy while healthy ensures coverage for future diagnoses.
Why do I need disability insurance?
Disability insurance replaces income if you're unable to work due to a disability, providing funds for essential expenses like rent, medical bills, and more.
What happens if I miss a premium payment for my universal life policy?
Universal life policies offer premium flexibility, using accumulated cash value to cover missed payments temporarily. Frequent reliance on this feature may require higher future payments.