Discussing life insurance is difficult and sometimes confusing. However, it is important to ensure your family is not left with a financial burden. Life insurance can assist with paying a remaining mortgage, college expenses, replacing income, and for funeral expenses.
Understanding Insurance Vocabulary
Many life insurance policies use the same terminology regardless of the insurance provider. Premiums are payments to the insurance company. A beneficiary is an individual receiving money when the insured dies. Beneficiaries receive a death benefit, which is a predetermined sum of money. Riders provide an opportunity to add to a policy, such as in the event of having a child.
What Type Of Life insurance Do You Need?
Term life insurance is temporary because it is for a specific amount of time. This is usually a cheaper option. Term coverage has limits because it does not offer investment or cash growth opportunities. Further, a death benefit is paid to beneficiaries only if the insured dies during the term of the policy. Because of these differences, term coverage premiums are generally lower.
Permanent life insurance plans do not expire as long as premiums are paid. Whole life insurance is permanent coverage offering a guaranteed return on built up value. Universal life insurance is also permanent coverage but may have varying premiums or returns.
More than one life insurance policy can be in place at the same time. Consider how much coverage your loved ones will need and when they will need assistance in your absence. If there is a foreseeable time period where the financial burden could increase, additional life insurance coverage would make a difference.
Establishing your goals and discussing your options is important when purchasing life insurance policies. It is also important to understand when and if policies expire so there are not lapses in coverage. If you purchase life insurance, read the policy completely and make sure you understand your benefits.
The Merdes Law Firm has been helping injured Alaskans for more than 30 years. It’s who we are. And while we hope you never need us … We’re here if you do. ~ Ward Merdes
Source: “How Does Life Insurance Work?” by nerdwallet.com | Photo
