Life insurance is a financial product that provides a sum of money (called a death benefit) to designated beneficiaries when the insured person passes away. It’s designed to offer financial protection for your loved ones, helping to cover expenses like funeral costs, debts, mortgage payments, education, and daily living expenses.
🔍 Types of Life Insurance
There are two main categories:
1. Term Life Insurance
- Coverage Period: Fixed period (e.g., 10, 20, or 30 years).
- Premiums: Typically lower and fixed during the term.
- Payout: Only if the insured dies during the term.
- Best For: Affordable coverage for a specific time (e.g., until children graduate or mortgage is paid off).
Example: A 20-year $500,000 term policy might cost $25–$50/month for a healthy 30-year-old.
2. Permanent Life Insurance
- Coverage Period: Lifelong, as long as premiums are paid.
- Includes Cash Value: Builds savings over time, which you can borrow against or withdraw.
- Types:
- Whole Life: Fixed premiums, guaranteed cash value growth.
- Universal Life: Flexible premiums and death benefit, with cash value tied to interest rates.
- Variable Life: Cash value tied to market investments—higher risk, potential for higher returns.
- Best For: Long-term financial planning, estate planning, or leaving an inheritance.
💡 Key Components
| Feature | Description |
|---|---|
| Premium | The amount you pay (monthly, annually, etc.) for the policy. |
| Death Benefit | The amount paid to beneficiaries upon the insured’s death. |
| Cash Value | (Permanent policies only) Savings or investment component. |
| Riders | Optional add-ons, e.g., disability waiver, critical illness, child coverage. |
✅ Why Get Life Insurance?
- Replace lost income for dependents
- Cover debts and final expenses
- Pay estate taxes or leave inheritance
- Support business succession planning
💰 How Much Coverage Do You Need?
A common rule of thumb is 10 to 15 times your annual income, but consider:
- Outstanding debts (e.g. mortgage, car loans)
- Children’s education
- Your spouse’s future income needs
- Funeral and medical expenses
🏦 Where to Buy Life Insurance
- Insurance Companies (e.g., Prudential, State Farm, New York Life)
- Online Brokers (e.g., Haven Life, Policygenius, Ladder)
- Financial Advisors or Banks that offer insurance products