What On Earth Is Life Insurance, and do I need it? Do you find yourself hearing about life insurance on TV commercials and wondering: If yes, you are not the only one. There are still many misconceptions about life insurance. According to a survey, 52% of people thought life insurance was too expensive. (Statista). Many people overestimate the price of insurance by nearly three times the actual cost.
This blog will explain life insurance, why you need it, and the two main types of life insurance.
Life-Insurance Key Takeaways
- A contract between the insurance company and the policyholder.
- The insurance company will pay a death benefit of your choice in exchange for payment of a premium by the insured.
- Leave a financial legacy behind to the next generation. It pays cash to your loved ones if you die.
- Term life insurance pays a death benefit upon the insured’s death if the insured passes away during a specified term.
- Permanent life insurance is designed to pay a guaranteed death benefit regardless of the insured’s age. Easily compare life insurance with a policy engineer.
Definition of life insurance
The true definition of life insurance is insurance that pays out a sum of money either on the death of the insured person or after a set period.” Simply reading the definition doesn’t necessarily make you understand life insurance. To keep it simple, life insurance is a contract between the insurance company and the policyholder. The insurance company guarantees a death benefit payment to the listed beneficiaries upon the insured’s death. The insurance company will pay a death benefit of your choice in exchange for payment of a premium by the insured.
Now that you know what life insurance is, you might ask yourself if you need life insurance.
Why do people buy life insurance?
The most common reasons people buy life insurance are:
- had a baby,
- bought a house,
- started a business,
- or you want to leave a financial legacy behind to the next generation.
Ask yourself: Will, my loved ones, struggle financially if I weren’t here?
When someone counts on your income and depends on you, you should have life insurance to secure a financial legacy. It pays cash to your loved ones if you die.
They can use it for anything
- funeral costs, bills, mortgage, student loans, college, retirement & more
The most frequently bought types of life insurance are term life insurance and permanent life insurance.
- Term life insurance pays a death benefit upon the insured’s death if the insured passes away during a specified term. A common reason people buy term insurance is to cover a mortgage. If you purchase a $700,000 home with a 15-year mortgage, you can buy a term life insurance policy to pay the home off and relieve your beneficiary of financial stress during a hard time.
- Permanent Life Insurance is designed to pay a guaranteed death benefit regardless of the insured’s age. This type of life insurance is commonly purchased to cover funeral expenses, gifting, and estate planning and is sometimes even used as a savings tool.
Which insurance should you get?
If you ask ten different insurance brokers, you might get ten other answers on which insurance is better and why. We suggest starting with a term insurance policy to cover your immediate needs like income replacement, mortgage protection, etc., and then meeting with a trusted insurance broker or advisor to discuss purchasing additional permanent life insurance if needed. Sounds like a lot of work, right?
We made this process as easy as ordering take-out. You can self-enroll or work with a broker.
Our online quoting tool will help you determine the right amount of coverage and which policy to select, all from the comfort of your mobile device.
And if you are not confident in making your own decision.
One of our licensed agents is ready to support you! You can rest assured that our policy engineers will work tirelessly to craft policies tailored to you.
Click here to get your personalized life insurance quote whenever you are ready to compare life insurance policies. If you still have questions, feel free to ask them in our comment section below.
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