Life Insurance

How does life insurance work?

A policyholder pays premiums and in exchange, the company will pay a lump sum, known as a death benefit, to the policyholder’s beneficiaries when the policyholder dies. The two main types of life insurance are term life and permanent life.

You can choose between the two types, depending on how much you are willing to pay for monthly premiums and what goals you hope to accomplish with your policy. Some plans are very affordable and others are a bit expensive. The cost will depend on a variety of factors such as your age and how long the life policy will last.


Types of Life Insurance

Choosing the type of insurance that will fit your needs.

Term Life Insurance

This type provides financial protection for a policyholder’s beneficiaries for a certain period of time, or a term; thus, the name. It is designed to temporarily provide financial coverage if you die. This type is more affordable than permanent life insurance and it works best for people who only need coverage until certain milestones are met, like until your kids graduate from college or your mortgage is paid off.

Permanent Life Insurance

This provides financial protection for your loved ones if you die, regardless of when will that be, as long as you continually pay your premiums. Since this type is meant to stay with you throughout your life, which is why it’s called permanent, it is more expensive than the other type, which is only active for a certain period of time. There are four different types of permanent insurance: whole life, variable life, universal life and variable universal life. These are best for people who have a child who will require lifelong assistance, people who want to make sure their spouse is taken care of long-term if he or she dies early, or people who want to make sure they can leave money behind to their loved ones.

Who Needs Life Insurance?


Anyone who wants to make sure that their dependent family members are taken care of financially if they die should purchase life policy. Also, individuals who have a high net worth often purchase the same to provide funds for their heirs to pay for their estate or inheritance taxes once they die. In addition, life insurance policies can be used to pay for the funeral expenses, to serve as a supplemental source of retirement savings and to pay off your business debts.

Do You Need It? If you have enough money (or you and your spouse have enough money) to take care of your family if you were to die, then you may not need life insurance. Also, once your children are all grown up and no longer depend on you for total financial support, you might not need it. Additionally, this might not be necessary if your estate is small enough that you won’t owe estate taxes or liquid enough that the estate taxes can be paid if you die.

However, you should always consult with a financial advisor if you are unsure about whether or not you need to purchase life insurance. You might think that you don’t need it, but it’s always for your and your family’s best interest if you’re insured.