When it comes to planning financially for your future, life insurance should be a vital part of your strategy. But what exactly is life insurance? How does it work? How much should you get? What’s the difference between term and permanent life insurance? These are just some of the questions you may have about life insurance. Here are 10 facts about life insurance that can help you better understand this product and how it fits into your financial plan.

1) What is life insurance?

Life insurance is a contract between an individual and an insurance company in which the insurer agrees to pay a designated beneficiary a sum of money (the death benefit) upon the death of the insured individual. 

Most people purchase life insurance for the peace of mind it provides in knowing that their loved ones will be taken care of financially if they die. 

There are two main types of life insurance: term life insurance and whole life insurance.

2) The need for life insurance

Most people need life insurance, yet many don’t have it or don’t understand it.  The number one reason that most people don’t buy life insurance is because they think they’re too young to die. What a horrible way to live! A lack of understanding about what type of coverage is needed and how much coverage you need also lead to an unwillingness to purchase a policy. Finally, some people believe that the best way to help their family in case of death is by leaving an inheritance for them instead of buying a policy for themselves.

3) Types of life insurance

Most people are familiar with term life insurance, which provides coverage for a set period of time, usually 10, 20, or 30 years. But there are other types of life insurance as well, including whole life, universal life, and variable universal life.

4) How much do you need?

How much life insurance you need depends on a variety of factors, including your age, health, lifestyle, and income. If you’re young and healthy, you may not need as much coverage as someone who is older or has health issues. Regardless of how much coverage you think you’ll need, it’s best to speak with an expert. The more information they have about your situation, the better their advice will be for determining the best amount of coverage for you. 

5) Factors that affect life insurance rates

There are many factors that affect your life insurance rates. Age, health, lifestyle, and the type of policy you choose all play a role in determining your premium. Financial responsibility, occupation and net worth also have an impact on your rate. Other considerations are location, marital status, number of dependents and driving records.

6) Who pays the premiums?

Typically, the person who is insured (the policyholder) pays the premiums, although in some cases another person can pay on behalf of the policyholder. The premiums are used to fund the death benefit, which is paid out to the beneficiaries upon the policyholder’s death.

7) Tax implications

When it comes to life insurance, there are a few things you should know in order to make the most of your policy. For example, did you know that life insurance can have tax implications? If so, and if you pay for the premiums with after-tax dollars, then any proceeds from the policy will be taxed as income. However, if you use pre-tax dollars for your premiums, then any proceeds will be free from taxation.

8) Critical illness insurance is optional (it protects against specific diseases like cancer, stroke, heart attack etc.)

– Critical illness insurance is not required, but it can be a helpful way to financially protect yourself and your family.

– Critical illness insurance pays out a lump sum if you are diagnosed with a covered condition.

– Covered conditions typically include cancer, stroke, heart attack, and other major illnesses.

– Critical illness insurance can help cover medical expenses, lost income, and other financial burdens associated with a serious illness.

9) Term vs. whole life – what’s best for you?

Most people don’t know that there are two types of life insurance: term and whole life. And, of those who do know, many don’t understand the difference between the two. Term life insurance is just what it sounds like – coverage for a specified time period, or term. Whole life insurance is coverage for your entire lifetime.

10) Are you covered? Get a free review of your current policy.

You work hard to provide for your family and make sure they are taken care of financially. But have you thought about what would happen to them if something happened to you? If you don’t have life insurance, now is the time to get covered. A free review of your current policy will show you how much coverage you need. Talk with a qualified professional who can help assess your needs and find the right coverage for you. You’ll be glad that you did when it comes time to pay those bills – because if anything happens to you, your loved ones will be protected!