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The Basics of Life Insurance

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Life insurance isn’t a pleasant thing to think about, and it may seem like an unnecessary expense. But if you have dependents who rely on you for financial support, then life insurance is really about protecting them in case something happens to you.

Youth minister Preston Newby and his wife, Tara, met during college and were soon married. After visiting their local insurance agent to purchase auto and renters insurance, they decided to look into life insurance policies. With a 19-month-old son and another child on the way, life insurance policies made a lot of sense in case anything ever happened to either of them. Unfortunately, this worst-case scenario became reality a couple of months later.

While driving to Canada to visit Tara’s parents, a group of cars up ahead of the Newbys slammed on their brakes and veered to the right side of the road. After coming to a stop, Preston hopped out of the car to find out what happened. One of the cars had hit an elk, and when Preston realized a passenger was bleeding, he ran back to his car to tell Tara to dial 911. As she reached for her phone, a car flew by and hit Preston, killing him instantly.

Thanks to the life insurance policy the Newbys purchased months earlier, Tara was able to pay off the family’s existing debt and provide for her two young sons after Preston’s death.

Whether you are 25 or 55, a life insurance policy gives you the peace of mind that should the worst happen, you and your loved ones will be taken care of.

Even if you already have life insurance through your employer, you may be underinsured. Click here to get started —we can work with you to ensure that there aren’t any gaps in your current coverage. 

The Basics of Life Insurance
There are two basic types of life insurance: term life insurance and permanent life insurance. The type of life insurance policy that best suits you will depend on your unique needs.

  • Option #1: Term Life Insurance
    Just as its name implies, term life insurance covers you for a specific period of time, or term, that you choose. Since it offers a death benefit but no cash value, term life insurance is an inexpensive way to protect your beneficiaries for a specified period of time.

    Renewal term life insurance can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. It can also be converted, or exchanged for a permanent insurance policy, without evidence of insurability down the road. It’s important to note that rates generally increase along with the insured’s age.


     
  • Option #2: Whole Life Insurance
    Permanent life insurance is any form of life insurance other than term. Examples are whole life, universal life and variable life. These policies combine term life insurance with a long-term, tax-sheltered savings plan.

    Whole life is the most basic type of permanent life insurance. It provides coverage that lasts a lifetime and also builds up a cash value that you can borrow against, withdraw or use to pay future premiums.

A life insurance policy with a cash value is ideal for those who have a lifetime need for insurance protection, prefer stable premiums over the life of the policy, want a policy that allows them to build tax-deferred values, and value the high degree of coverage the policy affords. While rates for a whole life insurance policy remain stable over the life of the policy, premiums are initially more costly than for term insurance. 

How Much Insurance Do I Need?
Regardless of whether you choose a term or permanent life insurance policy, both afford protection and peace of mind. To find the right amount of coverage, it’s important to weigh your dependents’ current lifestyle and spending needs against their future sources of income and assets. We can help you figure out how much your family will need to replace this lost income over this length of time should something happen to you. Click here to learn more.

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