With so many details and nuances that go into life insurance policies, it can get confusing. In order to fully understand what life insurance is and if you should be considering it, it’s essential to understand the basics. We break down the fundamental life insurance vocabulary, who needs it and which policies are best suited for folks.
Common Vocab Terms
One of the most popular questions surrounding life insurance is defining term life insurance. Term life insurance is purchased in increments based on a fixed rate and how long you need insurance.
Other frequently used terms in life insurance include death benefit, beneficiary, trust, and riders. A death benefit is the amount of insurance that is paid out if and when you pass away. A beneficiary is the person who receives the money if the individual with the life insurance policy passes away during the length of their policy. A trust is a document that says where your money is going to go, when it goes, and what happens with your money when you pass away. Riders are insurance add-ons that enhance your policy.
Who needs it?
Even though we all typically insure our homes and cars, not everyone needs life insurance. Life insurance is important when someone needs money when you pass away. In most situations, it comes down to either having a large amount of debt, maybe from home or school, or having a high liability - like kids. When thinking about life insurance, consider if your kids depend on your income and where your gaps are financially when coming into retirement age.
How much/which type of policy is best suited for each group?
There are two types of life insurance policies, term and permanent. Term life insurance is temporary and lasts a chosen amount of time for a specific amount of coverage, while permanent life insurance lasts until the policyholder passes away and grows through the duration of the policy. Term life insurance is less expensive and offers the ability to purchase larger amounts of insurance which most families need. Permanent or whole life insurance makes more sense for families with financial means and the need for an additional vehicle to transfer wealth between generations.
It is difficult enough to juggle all of the everyday stressors in our lives, let us take worrying about life insurance off your plate! Whether it is complicated life insurance vocab or questions about various plans, we’ve got you covered. For additional questions or to receive a quote, contact us!