Life Insurance Information
Life Insurance Quote
Family matters, and so does financial security. That’s why you always want to provide for your loved ones, even after you die. The correct life insurance policy can help you do so. Upon your death your income might dry up, but life insurance can provide a settlement to help those left behind.
No matter where you are in life, consider your life insurance goals within reach. The life insurance team at Focal Point Insurance can help you meticulously review your qualifications and policy options to find the coverage that is best for you. All our clients can optimize coverage to fit their financial goals.
How does life insurance work?
When you buy life insurance on yourself, you essentially place a value on your own life. You become the insured party listed on the policy.
On your death, your policy will pay out a sum, called a death benefit, to a recipient you listed when you bought the policy. This recipient is your beneficiary. A beneficiary might be a spouse, child, executor or even a charity of your choice.
Usually, upon receiving your death benefit, a beneficiary can choose to do with the money what they want. They might use the benefit to pay funeral costs, household expenses or to receive income support now that you are no longer around. The death benefit also doesn’t go through probate, so the beneficiary usually receives the full value upon payment.
If you want more control over where the money goes after your death, consider naming a trust fund as your beneficiary. When you die, the money will go into the trust, and the trust will contain rules on how someone is supposed to use the money.
How much life insurance should you have?
There are two primary benefits your life insurance might offer—death benefits & cash value.
To choose a death benefit, consider how much income you will contribute to your family during your life. Select a benefit amount that reflects your average income multiplied by at least 10 years. Someone who makes $75,000/year might need $750,000 in life insurance, for example. If you want the money to go towards a specific cost like a mortgage or tuition, then you choose an amount based on that value.
Some policies can accumulate cash value. When you pay your premium, a portion goes into an investment account managed by the life insurance company. The account value will grow over time, based on investment performance. Policyholders can use the cash value account as a source of income while they remain alive. The cash value does not roll into the death benefit upon the insured’s death.
What types of life insurance policies can you buy?
There are three primary types of life insurance.
- Term Life Insurance: Policies only last for a certain number of years, usually 5, 10, 20 (or more). If the insured person dies during that term, then the policy will pay out. The policy will expire when the term ends, and you will have to buy new coverage to continue to have protection. Term policies do not offer cash value benefits.
- Whole Life Insurance: As long as you pay your premium, a whole life policy will remain in effect indefinitely. Most policies provide a death benefit and a cash value option.
- Universal Life Insurance: A universal life policy works like whole life insurance. However, it provides more flexibility. The buyer can often adjust their death benefit and pay premiums flexibly. Therefore, they can have more influence over their return on investment.
How much does life insurance cost?
Insurance companies base life insurance premiums on multiple cost-risk factors.
- The death benefit you choose will influence your premium. Higher benefits will cost more.
- Term life policies are usually the most affordable, since they do not contain cash value options or last indefinitely.
- our medical history, pre-existing conditions and tobacco use history might drive up your rates.
- Most life insurers require medical exams before they approve an application. While some insurers offer guaranteed-issue or no-exam policies, these often cost more.
- The applicant’s age will play a role, and policies are often cheaper the younger you apply.
What is not covered by life insurance?
Certain deaths might not be covered by life insurance, such as if the person dies by:
- By Suicide
- While committing a crime
- In war
- During high-risk activities or sports
- While traveling outside of the United States.
To prevent fraud, the insurer will require verification of the insured’s death. If the death is suspicious, then the insurer might refuse to pay or hold payment pending further investigation. Keep in mind, fraud might even occur if you fail to disclose past smoking habits or a pre-existing condition when enrolling in coverage. Therefore, be honest when talking to your agent about enrolling in or changing coverage. This will help ensure your policy will work when your loved ones need it.