How does Life Insurance work?
Life insurance, it's a topic most of us find difficult to address as it deals with a sensitive subject: death.
Although it's tough to discuss, more than likely you've thought to yourself, "How will my family manage financially if I were to pass?"
The answer is simple - life insurance! Life insurance may be one of the most important purchases you'll ever make.
Depending on the type of coverage you select, life insurance policies can offer to:
- Pay for funeral costs.
- Help pay the bills and meet ongoing living expenses.
- Pay off outstanding debt, including credit cards and mortgages.
- Continue a family business.
- Finance future needs, like your children's education.
- Protect your spouse's retirement plans.
But sadly, according to the 2013 LIMRA Insurance Barometer Study, 86 percent of people surveyed had not purchased life insurance because they assumed life insurance was too expensive, when in actuality, you can get coverage starting at as little as $13 per day.
The survey also found 80 percent of people over estimated the cost of life insurance to be twice as much as the actual cost.
So now that you understand a little about what life insurance is, let's talk about the two basic types of life insurance:
- Term Life Insurance: Provides protection for a specific period of time (the "term") and is designed for temporary circumstances. Term life insurance pays only if death occurs during the term of the policy; the most common term policies provide coverage for 20 years, but can run from one-year policies, to terms of 30 years or even longer.
There are two types of term life insurance policies:
- Level term: Death benefit stays the same throughout the term on the policy
- Decreasing term: Death benefit drops, usually in one-year increments, over the duration of the policy.
In essence, term coverage allows you to obtain protection, without breaking the bank.
- Permanent Insurance: Permanent insurance has no predefined term. It provides death benefit protection over the "whole" life of the insured, as long as premiums are paid. Because of the lifetime coverage period, permanent insurance usually has higher premiums than term life.
Permanent insurance falls into four categories:
- Whole Life: Most common option. Premiums remain the same for life and the death benefit and rate of return on your cash value are guaranteed.
- Variable Life: Potential for better returns through allocating your fixed premiums in investment sub-accounts.
- Universal Life: Allows flexibility of the amount for your premium payments along with guaranteed minimum death benefit (as long as your premiums are sufficient to sustain it) and access to tax-deferred cash values. However, if you don't maintain your minimum, your death benefit can be reduced.
- Variable Universal Life: Life insurance protection with investment features. With a variable universal life policy, you can take advantage of potential market growth; but keep in mind that investing involves risk, including the possible loss of principal.
Our blog is just a general explanation on life insurance - it's imperative that you speak with a professional when obtaining your life insurance policy.
At Pettineo Insurance Agency, we've been providing South Floridians with personalized life insurance policies for the past 30 years. With our experience and knowledgeable team, you can have the security and comfort that your family is protected by Pettineo.
If you'd like more information on which life insurance policy would be most beneficial for your needs, visit our website for a free quote http://pettineoinsurance.com/quote.html, or give us a call at 954.493.9424
Pettineo Insurance Agency Inc. provides life insurance in Fort Lauderdale, Lauderdale-By-The-Sea, Pompano Beach, Oakland Park, Boca Raton, Deerfield Beach, Hollywood, and all of South Florida.
