First-Time Life Insurance Buyers Frequently Asked Questions

Life Insurance

Applying for life insurance can be complicated, with many factors to consider. The following information might help you determine the best life insurance policy for yourself and your situation.

What is life insurance?

Life insurance is a type of coverage that pays a designated amount of money, often referred to as a death benefit, to the beneficiary or beneficiaries listed in the policy. Coverage often is available in two forms: term life insurance and whole life insurance:

Term life insurance—A term policy will only last a set number of years. The policy will pay the death benefit if the insured dies before the term ends. The policy expires if the insured doesn’t pass away during the policy’s term.

Permanent life insurance—Once secured, this policy generally remains active for the rest of the insured’s life as long as the premiums are paid, and it provides a death benefit upon the insured’s passing. Many permanent life insurance policies also accrue a cash value.

Who are the parties in life insurance policies?

There are typically three parties involved in most life insurance policies.

The policyholder—This party pays the life insurance premium for the policy and makes decisions pertaining to the coverage.
The insured—This is the party whose life is insured. When the insured passes away, the death benefit can be disbursed to the beneficiary or beneficiaries listed in the life insurance policy.

The beneficiary or beneficiaries—This is the party or parties that receive the death benefit. The beneficiaries can use the money to pay for various costs (e.g., rent, debts and tuition). Beneficiaries generally can be primary or contingent. Primary beneficiaries have the first claim to the death benefit while contingent beneficiaries may receive the death benefit if the primary beneficiaries are unable to do so.

An individual can usually be both the policyholder and the insured, but if a policyholder wishes to be a beneficiary, the policyholder will typically need to have an insurable interest in the insured and their permission

Who can be a beneficiary?

Almost anyone can be listed as a beneficiary, but some common beneficiaries might include the following:

Spouses

Parents
Adult children
Trust accounts
Charities

Additionally, certain regulations may apply if minor children are named. For example, they might not be able to directly receive the death benefit payments because an adult is designated to manage the funds until the minors reach the age of majority. Contact us to learn more about policy options and terms.

How much coverage do I need?

Coverage needs vary among policyholders and depend on factors such as family, income and health. Regardless, it is common to have coverage several times that of the insured’s income, as the death benefit commonly goes to their loved ones to help cover costs such as tuition and bills.

What will my policy cost?

Life insurance costs can vary significantly among applicants. Common factors that might influence your life insurance rate may include:

Net worth
Health
Gender

Your insurance provider might consider additional variables or require a medical exam.

Regardless of where you are in life, it’s essential to consider life insurance coverage to help ensure you and your loved ones are financially protected. Contact our agents for more information.

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