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     Life Insurance Basics


What is Life Insurance?


Generally speaking, life insurance is a contract between you, as the insured, and an insurance company as a way to provide protection against the economic loss caused by your death.


Types of Life Insurance


Whole Life Insurance



Whole Life is the most basic type of permanent life insurance.  Your premium will purchase a specific death benefit and produce a specific cash value, which are guaranteed for the life of the policy as long as the premiums are paid.  Whole Life premiums are usually higher than term premiums, but are guaranteed not to increase.  This type of insurance is great for people who want to ensure that they are covered for a lifetime, and like the idea of building cash value.  Cash value is generally accessible in the form of a loan or a withdrawal during your lifetime.



Term Life Insurance


Term insurance, as the name implies, is coverage that is in place for a certain length of time, generally referred to as the “term period”.  Typically, you can purchase it in term periods of 10, 15, 20, 25 or 30 years.  Should you die before the end of the term period, your family, or beneficiaries, will receive the death benefit.




Universal Life Insurance


Universal Life is a flexible-premium, adjustable-benefit life insurance contract which accumulates cash value.  Flexible premium means that (subject to certain limitations) the policy owner may pay more or less than the premium stated in the contract.  Depending on certain factors, premium payments could be skipped in particular years at the policy owner’s discretion.  The adjustable benefit allows the policy owner to increase or decrease the stated death benefit, subject to certain guidelines.




Life Insurance Basics

Why Do I need Life Insurance?



The main reason for life insurance is to provide income replacement to your beneficiaries when you die.  However, if our needs include estate planning, cash accumulation, or final expenses, life insurance can help you achieve these goals as well.


Income replacement:


For most people, their key economic asset is their ability to earn a living.  If you have dependents, then you need to consider what would happen to them if they no longer can rely on your income.


Pay outstanding debts or long-term obligations:


Life insurance can play an important role when planning for you and your family’s future financial needs.  Consider the expenses your family may have at the time of your death - mortgage bills, car payments, college, medical expenses, or funeral arrangements.  Life insurance provides a measure of additional protection that can help bridge the gap between what you have now and what your family may need when you pass away.


Estate planning:


One of the greatest benefits life insurance offers you is that it passes the policy proceeds to your beneficiaries – the people who will receive the life insurance benefit – generally income tax-free.  Moreover, because of its design, your family may not experience the burden of extra income tax at your death or have the money go through a lengthy probate process.  The proceeds of a life insurance policy can be structured to pay estate taxes so that your heirs will not have to liquidate other assets.


Charitable contributions:


If you have a favorite charity, you can designate that all or part of the proceeds from your life insurance goes to that organization.