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Understanding Life Insurance Benefits
Life insurance has several benefits, especially for people who have family members or other dependents who rely on them financially. When the policyholder dies, the insurance company pays a death benefit to the policy's beneficiaries. This payout can be used in any way the beneficiary sees fit, but is commonly used to:
- Pay for funeral and burial costs
Replace loss of income and help your family pay for bills and mortgages
Act as an inheritance to chosen loved ones, business benefactors or charities
Pay estate taxes
Build tax-deferred cash value and enhance your investment portfolio (in the case of permanent life insurance)
Cover educational expenses, medical bills, property and vehicle loans, and other debts
Types of Life Insurance
The two main types of life insurance are term life insurance and permanent life insurance.
- Term life insurance is temporary life insurance that typically spans five to 30 years. Term life insurance is usually less expensive than permanent insurance, which makes it a popular choice among younger buyers looking for lower costs. Term life can often be renewed at a higher premium when it expires, or can sometimes be converted to a whole life policy.
- Permanent life insurance provides coverage for your whole life and has fixed premiums. Permanent life insurance also builds cash value that you can borrow against or withdraw from. Certain forms of permanent life insurance can also be attached to investments that carry higher risks and payoffs.
What Size Policy Should I Buy?
Although it's hard to predict exactly how much life insurance you'll need because everyone's situation is different, a good rule of thumb is to multiply your salary by 10 to get an average for your policy coverage needs.
It may also be helpful to calculate how much debt you have. If your debts outweigh your assets, you may want to purchase a policy that will cover your unpaid debts in full. Otherwise, these expenses will likely be left to your loved ones to pay.
How much you'll pay for a life insurance policy depends on several factors, including your:
- Policy type
- Insurance company
Speak With an Agent
A licensed agent can help you better understand your options and match you with a policy that works for your needs and budget. Speak with an agent now at 1-800-966-7169.
*Applications for insurance may be subject to acceptance by insurer. Rates and coverage amounts will depend upon the carrier selected.