What is Life Insurance and how does it work?
For many people Life Insurance is a mysterious thing that they hope they will never need. In this article the goal is to help you understand what life insurance is and how it works, so you can make an informed decision to better protect your lifetime of hard work.
One of the easiest ways to think of Life Insurance is to imagine today was your last day of life, then ask yourself what tomorrow’s financial picture will be like for those you leave behind. Life Insurance insures tomorrow for those you leave behind.
Life Insurance insures your economic value: Your ability to work and produce income, your savings and assets grow in value while you are alive, these all have a financial value. When others depend on and need your income to maintain their life, this is what you are insuring.
Not only does life insurance ensure your economic value but it allows you to maintain a level of lifestyle your family is accustomed too. The policy provides a “Tax-Free” Benefit, this money will allow your family to continue living in your house, drive your cars and pay debts, without having life turned upside down.
Life Insurance Terms
Policy: A policy is the contract between the individual and the insurance company for a specified face amount with a premium and time limitations.
Policy holder: The owner of the insurance policy, the policy holder can be the insured or someone else could be insured, usually having an insurable interest.
Face Amount: The death benefit that the policy to pays the insured to the insured on a “Tax Free” basis.
Premium: The cost of the insurance policy based paid on a monthly, quarterly, semi-annual or annual basis
Beneficiary: The individual, individuals or organization who will receive the face amount of the policy when the insured dies.
Cash Value: The value within a permanent policy that can be withdrawn from the policy, this mainly applies to Whole Life and Universal Life.
Riders: Optional additional benefits that can be added to a plan, such as Accidental Death, Living Benefits, Child Coverage, Return of Premium, Etc…