Frequently Asked Questions about Life Insurance

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What is life insurance?

Life insurance is a contract between an insurance policy holder and an insurer that promises to pay a designated beneficiary a specific amount of money in exchange for a premium that the beneficiary receives following the death of the insured person.

Why do I need life insurance?

Life insurance gives you the peace of mind you need to make sure that your family and loved ones are financially protected at a time when it’s needed most. In the case of your death, your named beneficiaries receive money to put towards:

  • Your last expenses, including burial costs and estate taxes
  •  Your income—to uphold a certain standard of living
  • Your family’s home—to pay off the mortgage and other related debts
  • A child’s college expenses
  • Supplemental retirement income
  • Settling an estate

How do I know how much life insurance I need?

Life insurance should typically cover no less than 10 times your annual income, in addition to any mortgages you have, which should be added on to the amount of insurance you calculate is needed to cover your income. This can be purchased in layers and to fit your time frame.

How often should I review my life insurance needs?

Your life is constantly changing, from your job, to your home, to your family. This means that your financial needs change over time as well to adapt to your lifestyle. It’s suggested that you review your life insurance coverage at least once every 5 year period, particularly when you experience a major life change or transition. This will ensure that your life insurance policy is up to date and can cover and additional expenses you incur.

Who can I name as beneficiaries for my life insurance policy?

You can name anyone who is financially dependent upon you in some way as a beneficiary to your life insurance policy. This may include adults or children that you support or owe money to, as well as a charity if it is one that you have a history of donating to. You cannot name an acquaintance, friend, or relative as a beneficiary if you have no financial relationship with them.

What are the differences between term life insurance, universal life insurance, whole life insurance, and variable life insurance?

  • Term life insurance: term life insurance provides financial protection for a specific period of time, for example, 10-20 years. The premium is typically lower than permanent life insurance.
  • Universal life insurance: universal life insurance is a permanent type of life insurance that provides lifetime coverage. Policies are flexible in that they may allow you to raise or lower your premium and coverage amounts throughout the duration of your lifetime.
  • Variable universal life insurance: variable life insurance is a permanent type of life insurance that provides lifetime coverage. Variable universal life insurance gives you the same flexibility as universal life insurance while also giving you the opportunity to invest cash value into the stock market.
  • Whole life insurance: whole life insurance is a permanent type of life insurance that also provides lifetime coverage. Unlike universal life insurance, however, premiums are fixed but commonly used to accumulate tax-deferred savings.

There are many things to take into account when purchasing Life Insurance, and changes in your life situation can reflect changes in your insurance requirements. That’s why it’s important to carefully consider the different policy options and ensure that you have the right solution to meet your life insurance needs.

Visit Insurance Town & Country today to have one of our insurance specialists review your current life insurance situation and help you design a policy to plan for the future.
At the end of the day, one of the biggest investments you can make is an investment in yourself.
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