What is Life Insurance?

Think of life insurance as the means to replace your income for your family if you die. It is an important part of any long- term financial plan.

What type of life insurance should you get?

Let’s go over the basics of the two most common options.

Term Life Insurance

Term life insurance is the simplest and usually the most affordable type of life insurance you can buy. That’s because it’s insurance that does one thing: pays the people you choose as your beneficiary a fixed amount of money if you die during the term of the policy.

How much insurance do I need?

With term life, you’re paying the insurance company to assume the financial risk of your death during the term (time limit) of your policy. Typical terms are 10, 15, 20, or 30 years. So, if you buy a 15-year term life policy with $500,000 in coverage, you’ll make a monthly payment for 15 years. If you die during that 15 years, the insurance company will write your family a check for $500,000, also known as the death benefit.

It is usually recommended that you purchase a term life insurance policy for 10–12 times your annual income. That way, your income will be replaced if something happens to you.

The premium for term life insurance is generally based on your age and current health status.

Permanent Life Insurance

Permanent life insurance does two things:  it provides the benefits of life insurance, paying your beneficiaries in the event of your death as well as being an investment account.

A permanent life insurance policy includes “cash value.” Cash value is like a savings account you’re depositing money into every month. It’s a cache of money that you own and can access or borrow against. The longer you have the policy, the more cash value the policy has.

Permanent life policies don’t expire. They continue until you die or stop paying your premium.

Permanent life insurance policies can include whole life, universal life, or variable universal life. Each policy is slightly different. We can help you personally navigate a permanent or term policy to fit your needs, and your budget.