Life insurance is important for all families. Unfortunately, Americans are underinsured and many have no life insurance at all.
Why is that?
Often people do not realize how important it is to get life insurance until they see someone else lose a loved one or lose someone themselves. Unlike car insurance, life insurance is not legally mandatory.
Families are simply unaware of how necessary life insurance is until they are directly affected. That is why September became life insurance awareness month. A non-profit organization called Life Happens started Life Insurance Awareness Month back in 2004 to help families train life insurance.
Quotacy aims to help 1
What is life insurance?
Life insurance has a main purpose: to give families money when a supplier dies.
Life insurance is an agreement between the policyholder and the life insurance company. The insurance owner promises to keep the insurance, or active, by paying premiums and in return the insurance company promises to pay a death benefit on the death of the insured.
»Calculate: Life insurance needs calculator
Life insurance terms to know
Insured – The person covered by the insurance.
Insurance owner – This is the person (or entity) who applies for life insurance and retains certain rights, e.g. who have the freedom to change recipients. The insured and the insurance owner can be the same person.
Payer – The person who pays the insurance premiums. This person is often the insurance owner.
Beneficiaries – The person (s) or party (ies) who receive the death allowance when the insured dies. The policyholder can name a person as a beneficiary, as a spouse or a child or several persons, with the death benefit divided into percentages until 100% of the death benefit is reported. The beneficiary and the policyholder may be the same person, but the beneficiary may not be the same as the insured.
Death benefit – This is the amount of money that the police beneficiaries receive when the insured dies. It can also be called nominal value, coverage amount, insurance value, payment amount or income. insurance inforce, or active. Premiums can be made in several frequencies, for example monthly, quarterly, semi-annually or annually.
Expiry period -The date when a forward policy ends and the coverage ends. Permanent insurance has no expiration date.
Risk class – The risk class is the health classification insurance companies that assign the applicant determined based on height / weight, age, tobacco use, family history and personal health history, among other factors.
Table rating – Table rating is a price increase applied on top of a risk classification based on an applicant's health and medical examination results.
Rider – A rider is a term used for any additional benefits or alternatives that may be added to an insurance policy.
The two main types of life insurance
Term insurance is temporary – designed to last a certain period of time. Term insurance is usually purchased in terms of 10, 15, 20 or 30 years. It is the most affordable form of life insurance.
If you stop paying your premiums, your insurance will end. There is no penalty for canceling it, but you will not receive a refund.
Life insurance is time-limited, but if you decide you want more coverage, you can renew your insurance, convert it to a permanent insurance or buy a brand new insurance.
Permanent life insurance
Permanent life insurance lasts your whole life. There are some types of permanent life insurance, but all of life is the most well-known and uncomplicated.
Over time, a cash value balance is created within the insurance that you can access during your lifetime via insurance loans. You can also choose to buy full life insurance that pays dividends from the insurance company's investments. It is because of these benefits that whole life insurance has much higher premiums than forward insurance.
If you stop paying your premiums, your insurance will end, but if your insurance has generated a cash value, you can receive these funds minus any transfer fees and insurance loans.
»Read more: Term vs Whole Life Guide