Purpose of a Life Insurance

The primary purpose of life insurance is financial protection for survivors. It effectively creates an instant estate to meet survivor needs. Some policies also include other benefits such as savings, investment opportunities, long term care provisions, etc.


What is a Life Insurance Policy

It is a contract with an insurance company where, for the exchange of premium payments, the insurance company will provide a lump sum payment, known as a death benefit, to be paid to a beneficiary upon the insured’s death. The insured is called the policy owner and people who receive the funds are the beneficiaries.


Benefit of Life Insurance

  • Income replacement for years of lost salary
  • Paying off your home mortgage
  • Paying off other debts such as car loans, credit cards, etc.
  • Providing funds for kids education


Principle Types of Life Insurance Policies

Term Life – this policy varies by the term of the policy and the medical condition of the policy owner. Typical terms are 10 year, 20 year, and 30 year. When the term ends the policy ends and the benefit ends.

Permanent Life: there are three types of permanent life: 1. Whole life, 2. Universal Life, and 3.Variable Life. Permanent Life is as the name implies, life insurance for as long as you live. It is possible, as the cash value of the policy grows, that the premiums may be paid out of the dividends from the accumulated cash value.


When to review your Life Insurance policy

It is always good to review your life insurance needs periodically as you age because your needs and ability to pay may change with age. For instance, if you buy a 30 year term life policy at 20 years old it will expire at 50 years old. You may, however, need continuing life insurance at 50 years old and the price may increase substantially depending on your medical condition.