The main purpose of a life insurance policy is the comfort of understanding that the beneficiaries named in our policy will still be financially able even if we pass away. It may be morbid to think about it but as with any insurance, it is a protection against the unexpected and unknown.
How it works
Understand that Life insurance is a contract between you and an insurance company. You buy a policy and agree to pay the monthly, quarterly or annual premiums for the term of your policy. Typically, you’ll have the option on how you want to pay your premium. If you pass away, the insurance company pays whoever you named as your beneficiaries the amount of money specified in your policy.
Age, sex, and pre-existing medical conditions greatly affect the price of life insurance premiums. Naturally, older people will have to pay a higher premium because they face greater health risks such as heart conditions, high blood pressure or mental illnesses. A family with a strong history of heart disease or cancers will also have to pay a higher premium. Same with smokers and people who participate in “dangerous” hobbies such as scuba diving and skydiving.
Types of Life Insurance
There are two main types of life insurance: term and permanent life insurance.
Term life insurance
As the name implies, you would only be covered by this insurance for a set number of years. Keyword: Term. This is the least expensive option but the premium is only fixed for the length of the policy. Let’s say you outlive your policy and you want to renew, you’ll have to pay a higher premium because you’re older now, and the money you already spent on it will be for nothing.
Permanent life insurance
This policy will offer coverage for the entire life of the policyholder. It never expires. It also includes a cash value component. Some of the money can be invested in the stock market or taken out as a cash loan. This gives you the option to access the money while you’re still alive. Loans taken out against the cash value of the policy are also tax-free. However, this usually accumulates interest and reduces the death benefit.
The downside of permanent life insurance is that the premiums are much higher than term life policies. However, you can usually cash out a permanent policy for its valued amount.
Life insurance isn’t necessarily complex but it can be incredibly complicated. Before purchasing a life insurance, it is a good idea to first contact a licensed agent to be able to figure out which plan would be the best for you according to your needs and circumstances.
At Filer Insurance, Inc., we work hard to make sure that our clients are well-protected with life insurance policies that they can afford. To learn more about how we can help you, please contact our agency at (305) 270-2100 or Click Here to request a free quote.