meta Skip to main content

Life Insurance Basics

Life insurance helps provide peace of mind by planning for an unexpected future. Nobody likes to think about the worst case, but its even more difficult thinking about what your loved ones must go through if it happens. Life insurance helps provide financial certainty to those you leave behind. There are many types and forms of life insurance polices designed to fit all manner of needs.

The Basics

Who's if for?

The easy answer is – just about everyone. Does that mean you need to go buy a policy on yourself, your spouse and all your children? Likely not, but take a step back and think about the impact your passing would have on your loved ones and family. Would they be able to maintain their standard of living and meet financial commitments such as mortgages and achieve financial goals like retirement, or higher education? Life insurance provides a mechanism to help reduce the burden of your passing by providing the financial stability to help address these concerns.

How much insurance do I need?

There is no one answer to this question, and it may actually change over time. Most people typically take a needs based approach to determining how much life insurance to purchase. For example, totaling current and expected future debt such as home mortgages, auto loans and tuition costs along with anticipated cost of living expenses and inflation. This helps provide a ballpark figure on what level of financial security is needed – the good news is many policies provide tools to adjust different aspects of coverage in order to address changing needs over time.

Types of Life Insurance

There are many types of life insurance products but the two most basic forms are Term and Permanent.

  • Term Life Insurance – provides coverage for a specific length of time, typically ranging from 10-40 years and provides a lower premium when compared to a permanent policy. When the term is finished there is no more coverage.
  • Permanent Life Insurance – provides coverage for life and accumulates a cash value over time. For this reason premiums are higher than term coverage but there are many types of permanent life products offering flexibility in when and how you fund them.

Which product is right for you? It really depends on what you’re trying to achieve, the best way to find out is to discuss your goals with an agent and learn about the pros and cons to the different approaches.

Keep in Mind

We are only scratching the surface here – There are many types of insurance policies and even more optional coverages you can elect to add. A quick conversation with us can help focus in on the products that align with your goals.

Coverage can be affordable – Many people assume life insurance is just too expensive for them and they would be surprised to find that there are many affordable options that provide good coverage.

Medical Exams – Often times and especially for high value policies, insurance companies will require a medical exam. These will most often occur at a place of your choosing (such as at home) and do not take very long. The result of the medical exam is used in determining your insurability and rating for the policy premium.

Work Policies – If you’re employer offers a group life policy that is fantastic! Many assume that if insured through work then there is no need for an individual policy. In most cases this is a false assumption. Most group policies will pay a multiple (such as 2x) of your salary as a death benefit, which for many may not be enough. Furthermore, these policies are only good while you are at that job, if you leave or are fired your coverage is terminated with your employment.