What is Life Insurance?
7 Frequently Asked Questions
Life Insurance coverage is an insurance policy that pays out a death benefit upon a policyholder’s passing. This type of coverage protects dependents who rely on either a fixed income (e.g., pensions) or the policyholder’s income.
As a contract between the policyholder and an insurance agency, the insurance agency agrees to pay out a sum of money from a particular insurance company in return for a monthly fee over a fixed amount of time.
There are three types of life insurance: term life insurance, whole life insurance, and universal life insurance. These coverages provide protection for different times throughout a person’s lifetime:
Term life insurance is the most common type of insurance coverage available. This insurance policy is written for a set period, where the policyholder pays premiums until the time of their passing.
Whole life insurance coverage is designed to pay a guaranteed minimum interest rate on the cash value inside the policy every year until the policyholder dies.
Universal life insurance provides coverage similar to whole life insurance coverage but is more flexible to changes in the policy.
Below, we’ve put together a list of frequently asked questions that each potential policyholder should be asking before purchasing a life insurance policy. Read through the list, then be sure to let us know if you have any other questions!
1. What happens if I die? Will my family be able to pay the bills and cover the cost of my funeral?
Life insurance serves as a safety net for dependents if something were to happen to you.
In terms of death benefits, life insurance can be used to pay off your debts and final expenses, leaving the excess amount with your surviving family members who rely on your income or pension benefits. You may also choose to put this money toward your children’s education costs.
2. Do I have enough financial responsibility to warrant life insurance coverage at this point in my life?
Sometimes, young people starting out on their own do not believe that they need life insurance because they do not yet have a family to support. What they often forget is that insurance isn’t just for supporting families – it’s also an emergency fund to cover your obligations and expenses after you’re gone.
You’ll also want to consider if you plan on getting married. Life insurance can protect your spouse financially against the risks associated with losing you once the two of you have started building a life together.
3. How can life insurance help me?
There are multiple ways that life insurance can be beneficial to you. Some examples include:
- Keeping a home in the family
- Safeguarding your family’s lifestyle
- Protecting your educational plans
- Covering your funeral costs
- Keeping your small business open
- And more!
Plus, if you have multiple insurance policies such as auto or home insurance coverage, your insurance agency will often let you bundle to save more money and protect what matters most to you even further! An experienced insurance agent specializing in life insurance coverage can discuss options with you after reviewing your concerns and needs.
4. How much does life insurance cost?
The cost of life insurance coverage varies from policy to policy. Still, even if you don’t currently own property or hold other significant assets, it’s essential to protect what little you may have in the event of an unexpected death.
Talk to an insurance agent about the amount of money you are willing to invest in a life insurance policy and fully understand how large a policy you should take out to meet your concerns.
5. Am I receiving the best insurance price?
The insurance premiums that insurance companies offer vary depending on several factors, including age, insurance amount, location, and more.
Affordability is an essential factor in determining insurance rates. Life insurance prices increase as you get older or if you choose to purchase a more significant policy. For affordable insurance coverage right now, an insurance agent will write a ‘term’ life insurance policy that provides temporary protection for a set time.
Insurance rates can increase at the time of renewal, so you want to ensure that you work with an insurance agent who is continuously shopping the top providers for the best prices available to you. However, you will typically have the option to purchase another term life insurance policy with the same conditions as before and simply reapply for insurance coverage when your previous term expires, rather than taking on additional risk factors that could result in higher premiums.
6. Can I decrease the cost of my insurance premium?
Insurance premiums can increase at each insurance renewal due to your age and insurance history. To lower insurance costs, consider purchasing life insurance with a shorter term, such as a 10-year term policy instead of 20. If you purchase another term life policy when your previous term expires, you might save hundreds or even thousands of dollars every year, so again, it is essential to work with a trusted insurance agent that is looking out for you by continuously searching for the best prices on the market.
7. Do I need to add a contingent beneficiary to my life insurance policy?
Some life insurance policies come with the option to add a contingent beneficiary.
Contingent beneficiaries allow you to expand your coverage under certain conditions. These beneficiaries are backup recipients to the primary beneficiaries named in your life insurance policy. Contingent beneficiaries only receive your life insurance benefits if the primary beneficiaries are unwilling or unable to receive them. Though contingent beneficiaries are often not required, many insurance companies recommend naming at least one to ensure that your affairs will be taken care of in the manner you had wished.
I need life insurance – can anyone help me?
We’re here for you! Contact Bray & Oakley Insurance Agency to get a quote and to speak with an experienced insurance agent who has the training and expertise in life insurance policies that you need.
And remember, if there’s a question that you have that was not answered above, feel free to let us know, and we’ll be happy to help!