Life insurance is one of those topics that we put on the back-burner. No one wants to talk about the eventuality of them passing away, and we especially don’t like to talk about what would happen if we passed away suddenly. However, life insurance is an important part of any financial plan. For National Life Insurance Awareness Month, we wanted to share some helpful information about life insurance, including what it is, its different types, and how it can help protect your family. As a Financial Advisor in Murfreesboro, TN, life insurance is a topic that we often discuss with clients because of its importance!
What is Life Insurance?
According to Life Happens, life insurance is an insurance policy that provides cash to your family or loved ones after your death. This "death benefit" helps replace your income and supports your loved ones in the event of your passing. Your family can use this payment for funeral expenses, mortgage payments, college tuition, and other bills.1
Different Types of Life Insurance
There are two main types of life insurance: term life insurance and permanent life insurance. Let’s look at the differences.
Term Life Insurance
Term life insurance policies cover the insured for a specific period, usually between 5 and 30 years, depending on your policy. Term policies pay a death benefit only if the insured person dies during the coverage term. These policies don’t carry any cash value, but the premiums are generally lower than permanent life insurance premiums. Furthermore, term life insurance policies may offer a greater level of flexibility because you can amend your policy as your needs change.
Permanent Life Insurance
Permanent life insurance policies cover the holder for their entire life. Some of these policies also carry savings or investment components. According to US News, this cash value “grows tax-deferred over time and may be withdrawn or borrowed against while you’re still alive.” However, withdrawing these funds will decrease the policy’s death benefit unless the funds are repaid.2
There are a few permanent life insurance options, including whole life (sometimes called "traditional" life insurance) and universal life. Each of these policies has its own pros and cons.
When considering which life insurance policy is right for you, think about the following factors:
- Coverage duration
- Coverage amount
- Cash value
Do You Need Life Insurance?
For most people, the answer to this question is “Yes.” Life insurance can help protect the people you care about if something happens to you. This could include a spouse, children, disabled family members, aging parents, or any other dependent. There are a variety of coverage limits, and the amount suitable for each individual differs based upon household debt & expenses, dependents, and legacy wishes.
If you continue to put life insurance on the back-burner, contact us to help. As a Financial Advisor in Murfreesboro, TN our goal is to provide education to clients on complicated topics so they can make informed decisions for future success.
- This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.