Life Insurance

As an earner with dependents, you have to consider life insurance. It’s a sad situation when a breadwinner prematurely loses his/her life and has not purchased life insurance. The money the dependents live on has suddenly disappeared, never to return Life insurance can help protect against that. Plus, some products will also allow you to accumulate wealth while you pay your monthly premium. In this article, you will discover:.

  • Life insurance defined
  • The three major types of life insurance
  • How often term life pays out
  • The rule of thumb for how much life insurance to buy


Life Insurance Defined

Life insurance is a policy that pays the beneficiary a certain amount when the policy holder passes away. That’s the easy part! The interesting part comes when trying to figure out which type of life insurance coverage is best for you and your situation. There are three main types of life insurance policies—term life, whole life, universal life. Below is an explanation of each type.


Term Life Insurance

Term may be the purest form of life insurance. It may also be the simplest. For example, it may be like this:

  • For a 55 year old non-smoker in good health at preferred rates, with a benefit amount of $200,000 on a 10 year term it may cost $95 per month.

What happens here is that the payout doesn’t change and neither does the premium for the 10 year policy term.

The two main advantages of term life include:

This policy is ideal for replacing the income in the event that you pass away while you have people depending on it. Often, you can renew term policies and some insurers even allow you to convert them to a whole life policy.

Note: One study places the payout likelihood of term life at less than 1% of the premiums it brings in


Whole Life

This contains a death benefit but it also allows you to build up cash value in the policy. You can also borrow against this amount as well cash it in. It’s designed to be insurance for life. Some things to consider about this type of life insurance are:

  • It cost more than term insurance
  • The premiums stay level throughout the policy period even if you hold it for 50 years
  • The investment of your premium is limited to just a few options

Note: Life insurers set their rates using mortality tables

The way this works insurance is that if you purchase $750,000 worth of life insurance, the idea is for the insurance company to recoup the entire $750,000 prior to you passing away,
Note: Life insurers set their rates using mortality tables


Universal Life

Universal Life was created to improve on the whole life product. Like whole life, it’s designed to be insurance for life. However, it has many more options than the whole life products. Here are some features of this policy:

  • Universal Life policies separate out the life insurance, admin fees, premium tax and investment charges which makes it easier to see where all your premium is going
  • In general, the premiums shift during the policy term, starting out low and increasing with the policy term although you can also adjust that also
  • You can adjust the death benefit
  • There are many investment choices so you’ll want to select an agent or broker who can clarify those with you

Note: Recommendations for purchasing life insurance range from anywhere between six to ten times your annual salary as a benefit amount


Life Insurance- Factors to Consider

There are many factors to ponder no matter which life insurance policy you select:

  • Other income sources for your dependents
  • Special needs like mortgages, college education and estate planning
  • The desire to build wealth over a long period of time
  • How much money you make
  • How much premium you can afford

Since, essentially you’re purchasing life insurance, probably the most important factor no matter which policy you select, is how much of a death benefit you want.

Note: there are 2000 companies selling life insurance. Try to stick with ones that are rated A or better by most of the rating organizations

There are many life insurance companies and products to choose when it comes to life insurance. Contact us. We’ll help you find the best product for you and your situation. You’ll feel protected and know that you’re doing the right thing for your family when you leave our

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