Life Insurance: Breaking Down the Basics
To protect your house, you have homeowners insurance. To protect your car, you have auto insurance. But, what about life insurance? Life insurance can seem complex, because it's not always easy to see what's covered. So, we're here with the CommunityAmerica Insurance Agency to break down the basics in a series of blog posts.
What is Life Insurance?
In a nutshell: a life insurance policy provides your family with financial security for the future, in the event that something happens to you.
In fancy insurance speak: life insurance is a contract between you, the policyholder, and the insurance company. To own the policy, you make regular payments (a.k.a. the premium). In return, the policy pays out a lump sum of money in the event of your death to your named beneficiaries, such as your spouse or children.
When looking for life insurance, you’ll first need to decide which policy type is right for you: term or permanent (also referred to as whole life). Here's what you can expect from each:
Term vs. Perm: See How They Compare
- Provides coverage for specified period of time, such as 10, 20 or 30 years
- If policyholder passes away during the term, beneficiaries receive policy pay out
- Often used for replacing income or covering debt
- Potential to convert to a permanent policy
- Usually more affordable than permanent, but has no value at end of term
- Provides protection throughout entire lifetime, as long as premium is paid
- Could possibly build cash value over time, which you can borrow against or withdraw from
- Can be used to help fund retirement or pass wealth on to heirs
- Options such as whole life or universal life allow for more customization
- Typically more expensive than a term policy
When choosing between the two, you'll want to consider a number of personal factors, such as your current stage in life, age, family status and future plans and financial goals. Our insurance advisors can help with those decisions and work with you to build a policy based on your individual situation. If you have questions or want to talk about your coverage options, give us a call at 913.905.7795 or toll free at 833.202.9595.