November 23, 2022
  • November 23, 2022

9 important things you need to know about life insurance

By on July 6, 2022 0

Insuring assets like your car or home is second nature to most Americans. But we often forget to protect our most important assets: ourselves and our family. Although the risk of death is minimal during our youth, there are many good reasons to invest in life insurance.

What everyone should know about life insurance

Before embarking on your first policy, it is important that you understand how life insurance works and what it protects. Here are 9 essential things everyone should know about life insurance.

1. Life insurance is important for people with dependents

If someone is relying on you financially, you should take out health insurance. This includes your spouse, children, parents and grandparents. You can even get life insurance for unmarried couples or non-romantic business partnerships if you can demonstrate that you have an insurable interest.

2. Life insurance is a contract (“policy”) with a company

Whether you are a family of four or part of a domestic partnership, the relationship between you and the insurer does not change. The insurer will create a contract/policy between itself and someone or something that has a financial interest in someone/something else’s life.

3. Life insurance is paid monthly but the cost varies

In exchange for the payment of a premium, your insurer undertakes to pay a non-taxable capital to your beneficiaries upon death. How much they get depends on what you do or what policy you buy. On the other hand, your premiums change according to your age, gender and state of health.

9 important things you need to know about life insurance

4. Life insurance does more than assign a monetary value to life

Life insurance is intended to cover the consequences of a person’s death. This includes funeral expenses, unpaid debts, tuition fees, lost earnings and paperwork. Life insurance also gives surviving family members time to grieve and the ability to recover financially.

5. Life insurance comes in two main forms: term and permanent

Term life insurance is inexpensive and organizes its premiums according to terms (5, 10, 20 or 30). Permanent insurance is more expensive than term, but stays with you for life. Permanent whole life plans have a cash value, which can be saved or used to pay your premiums.

6. Life insurance should be used as a risk management tool

Although permanent whole life insurance can be used to augment your investment portfolio, life insurance works best as a risk management tool. For example, it is better to pay off debt or maximize your retirement savings account before you start withdrawing from your life insurance.

9 important things you need to know about life insurance

7. Life insurance doesn’t have to be expensive or complicated

A healthy 30-year-old man will save more money on insurance than a 40-year-old man, but he’ll also save more than a 20-year-old man who smokes, drinks, or has a dangerous job. However, registering early will reduce your premiums and make the search process less complicated.

8. Life insurance is more effective if you talk to an agent

Talking to a life insurance agent about your policy is the best option. Not only will they be able to direct you to the best policy for your needs, but they can also guide you through the application and underwriting process. An agent may even agree to complete the necessary paperwork for you.

9 important things you need to know about life insurance

9. Life insurance can be canceled, but don’t do it lightly

Canceling the wrong policy can save you money in the long run. But if you still want a life insurance policy, don’t cancel the wrong policy until the right policy is in place. Switching is easier than taking out a new policy or insurer because your coverage is already approved.