life insurance 101

life insurance 101

Life insurance causes more confusion for people than perhaps any other type of insurance, partly because there are several different types of life insurance products, and partly because the best life insurance is unique to each individual. Should you buy term life or permanent life insurance? Do you need a broker or can you get life insurance from an agency? Should you buy life insurance coverage online or is that too risky? While you can buy online life insurance, it may be difficult to know what you are getting and whether it will adequately protect your family or business. Many people begin their search for life insurance by getting an instant online quote. But when it comes time to make a decision, they really want to talk with a professional who can guide them in choosing the best policy for their needs. Buying life insurance is a very personal decision and working with a full service independent agency like Covenant will help take the guess work out of the process.

In our experience, the main reason to buy life insurance protection is for the financial protection it gives your family and dependents. If you are the major income earner for your family or own a business, then life insurance definitely makes sense. Knowing exactly how much and what kind of coverage to buy so your loved ones can pay your final expenses and potentially receive ongoing support is easier when you have an expert advisor who can recommend coverages and help you know what questions to ask along the way.

Choosing the right amount of coverage typically requires a bit of math. You want to figure out how much your family or business needs for daily spending and major upcoming expenses in the event that you are not there to provide for them. You may also want to look at the cost of paying off any debt you have accumulated, or the cost of caring for young children or an aging parent. LifeHappens.org has a good calculator to help begin estimating your level of need.

Life insurance can seem complicated because of the different kinds of coverage offered and the terminology involved. Additionally, the details of the policy you choose will be unique to your personal situation. These unique needs are what will determine the type of coverage you need or can afford and for this reason it is smart to consult with one of our knowledgeable agents so you have all the tools you need to find the right coverage. Here is an overview of the most common terms:

  • Accidental death insurance: Also known as accidental death and dismemberment insurance, or AD&D, this coverage pays you or a beneficiary a benefit if you are in an accident that results in your death or dismembered.
  • Annuities: An annuity is a type of insurance that either pays income after your initial investment (immediate annuity) or accumulates income (deferred annuity). Either of these types of annuities can be fixed (guaranteed) or assigned a variable rate that pays out based on the policy’s associated investments. Life insurance companies typically offer annuities to help people obtain a stable income during retirement.
  • Critical Illness Insurance: While not a life insurance policy, critical illness insurance is often available through life insurance companies. You might buy critical illness insurance (or CI) if you have a family history of heart disease or cancer in order to ensure you have the financial resources to pay for your care.
  • No exam life insurance: This is life insurance coverage that some companies offer without requiring a medical exam first. Typically, this option will be more expensive because without submitting the results of a medical exam to the insurance company, you are an unknown and potentially greater risk.
  • Term life insurance: This is a life insurance policy that provides a death benefit only. Your annual premiums are locked in for a set term, such as 10 or 20 years. In the event that you pass away during this period, a death benefit is paid to your beneficiaries.
  • Permanent life insurance: This is a long-term policy, such as universal life insurance or whole life insurance, that includes an investment component and can cover retirement expenses in addition to providing a death benefit.
  • Universal life insurance: A permanent life insurance policy with a “liquid” account that accrues cash value, as well as interest, with each premium you pay. You can take out loans as needed for unexpected expenses or opportunities, such as a home purchase. You also can pay more than the scheduled premium, or take breaks from paying premiums.
  • Whole life insurance: Whole life is a permanent policy with an investment component that provides for your financial needs similarly to universal life insurance, but without the liquidity of the funds. This life insurance policy accrues a cash value and pays out at the end of the policy, if it is kept current.

As a full service independent insurance agency we work for you and not an insurance company. We also know life insurance and have access to the companies and options you will need to find the right protection for your family or business. This means we are dedicated to helping you make the best, most informed decision possible for your needs. Get a fast and accurate quote now to experience the Covenant difference for yourself.

 

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Information about Life Insurance provided by Trusted Choice

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