A Beginner’s Guide To Life Insurance

To better manage our risks in life and provide some protection against loss, we need insurance–auto, health insurance, disability and life insurance.

What is life insurance? A life insurance policy is a contract with a life insurance. The contract is typically bought by the primary wage earner in a household.

There are two main types of life insurance: Term Life and Permanent Life

Term life insurance provides financial protection for a specific time period, usually 10-30 years. The longer the time frame, the higher your premium costs will be. Traditionally, the premium payment for term insurance remains the same throughout the coverage. Other term life policies may have premium pricing changes at predetermined intervals, with rates rising with age.

Term life is generally cheaper than permanent life insurance and usually provides the value and flexibility. Term life insurance is intended to replace lost potential income during working years.

Permanent life insurance: whole life insurance and universal life insurance. These options have cash values that pay benefits upon the death of insured and have a savings/investment element.

Whole life insurance, the more popular of the cash value policies, is designed as lifetime coverage. The premiums are paid with fixed amounts and are typically more expensive than term life.

Universal life insurance policies may be more flexible. The owner of this policy may choose to pay a smaller or larger premium. Like whole life, the policy is generally designed for lifetime coverage. Universal life insurance provides both a death benefit and building cash value with greater growth potential based on a rate of return paid by the insurance company.

Millennials say they need information and education, explaining that they are uncertain about the different types, amounts and qualifying for coverage. Millennials tend to research life insurance products online more than other generations but would consider buying from an insurance professional.

Your life insurance policy should be able to address your family’s plans. If you are like most young people, you don’t have all the pieces of the puzzle but you can make some educated guesses.

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