Have you ever read a thesis on quantum physics or advanced calculus? Skimming an insurance policy might give you the same confused feeling. So let’s get on the same page! These life insurance basics will help you understand different policies and pick the right coverage. 

What the Dictionary Says About Life Insurance

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Here’s a life insurance definition from dictionary.com:

“Insurance providing for payment of a sum of money to a named beneficiary upon the death of the policyholder or to the policyholder if still living after reaching a specified age.”

This definition creates two questions:

• Who is the policyholder?
• Who is the beneficiary?

A policyholder is:

“The individual or firm in whose name an insurance policy is written; an insured.”

A beneficiary is:

“A person designated as the recipient of funds or other property under a will, trust, insurance policy, etc.”

To summarize:

• The policyholder pays a premium (usually a recurring payment) to the insurance company to keep life insurance coverage active.
• The policyholder names a beneficiary or beneficiaries when she sets up a policy.
• The beneficiary receives the benefit (or sum of money) from the life insurance policy after the policyholder passes away. 

Life Insurance Basics: Uses

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It might not comfort you to think, “Sooooo, my life insurance only works after I die, then?”

Instead of dwelling on your final moments, think about how the life insurance benefit can be used to:  

• Cover funeral expenses
• Donate to charity
• Fund a trust
• Keep a business going
• Pay bills
• Pay living expenses
• Wipe out debt

Calculating Your Life Insurance Needs

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Go to Google and search for this: “How much life insurance do I need?” You’ll find some conflicting results. That’s because different people have different life insurance needs.

We can’t predict how much coverage you need down to the penny, but the following calculation method will get you started.

How Your Life Insurance Rates Are Determined

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Your life insurance rates will be determined by a number of factors, including:

• Age
• Gender
• Coverage amount
• Coverage type
• Tobacco use
• Height and weight

You might have to take a medical exam depending on the coverage you choose. A medical professional (probably a nurse) will ask you a series of health questions, and you might need to provide a urine or blood sample.

Simplified issue life insurance skips the medical exam. This kind of coverage might work best for someone who has health issues. Generally, simplified issue plans offer lower coverage limits than other life insurance policies.

Different Types of Life Insurance

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Term Life Insurance Definition

Term life insurance costs less than other forms of life insurance.

It’s “term” insurance, so it provides coverage for a specified period of time. It’s great for covering specific debts like a home loan or expected college costs, but it might not account for your lifelong financial needs.

Your term life premiums can increase based on age and other factors. When your coverage term ends, you may have the option of converting your policy to a permanent life policy.

Permanent Life Insurance Definition

Unlike term life insurance, permanent life insurance accumulates a cash value and remains in force for your lifetime. The two main kinds of permanent life insurance are whole life and universal life. 

For more information or to schedule a full review, contact Beck Insurance Agency in Archbold or Whitehouse, Ohio.  Call 419-446-2777, email us at help@beckinsurance.com, or click here to submit your request.