What is life insurance?

Life insurance provides protection against the loss of income from the death of a wage earner. It can also be part of a foundation for retirement. Periodically evaluating life insurance needs should be an important part of everyone's financial planning.

Why do people need life insurance?

Anyone who has a family, supports a household, pays a mortgage, or plans to send children to college can alleviate the financial burdens created by their death, if they have life insurance. The dreams they have for their loved ones will live on. Life insurance is one of the greatest gifts one can give their family.

How does life insurance work?

All life insurance policies work on the same basic premise: make payments (called premiums) to the insurance company, which guarantees to pay chosen beneficiaries a sum of money upon the death of the insured.

How much life insurance is needed?

Enough to provide for dependents' immediate cash needs and their ongoing living expenses. As a general rule, individuals will require 5 to 10 times their annual income, depending on their lifestyle, number of dependents, and other sources of income.

How much does life insurance cost?

The cost varies depending on the amount of coverage and the type of life insurance being purchased, as well as the current age, gender, health and lifestyle of the insured. Overall, life insurance is very affordable and there is no good reason to be without it.

What are the different types of life insurance?

Term insurance is straightforward and often the least expensive type of life insurance coverage. Its for a specified number of years, hence the name "term". If the insured dies during the term, their beneficiaries are paid the amount of the policy. If the insured is alive when the term ends, there is no payout. Some policies allow for conversion into permanent life insurance at the end of the term.

Whole Life insurance is permanent life insurance that combines a death benefit with a cash accumulation component. Part of the premium goes towards building a cash value. Premiums are fixed and the policy will remain in force for the entire lifetime of the insured, provided the premiums are paid. When the insured dies, their beneficiaries are paid the amount of the policy.

Is it possible to borrow money against a life insurance policy?

You can only borrow money on the cash value portion of a Whole Life policy. Loan rates can be below prevailing market rates. If you don't repay the loan, the death benefit amount will be less any loans taken.

What are the risks of waiting to purchase life insurance?

Individuals may delay purchasing life insurance because they feel that they can't afford it. But in that case, the reality is they can't afford to be without life insurance. A family that is having a difficult time managing on their current income will have a much harder time facing the future without the salary of a main contributor. The fact is, not having life insurance is a huge gamble with potentially devastating consequences. Life insurance helps protect a family's financial security.

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