Life Insurance - A Beginner’s Guide


 Life Insurance - A Beginner’s Guide

Life insurance is a relatively new phenomenon, so many of us are unsure about how it works, what is covered by a policy, and the cost of coverage. But with this guide to life insurance you’ll find out everything there is to know about term, whole life and universal life insurances. Learn how they differ in cost and coverage and the most common questions people ask when considering this type of policy. You’ll also learn some interesting facts about families who have adopted children and why they should purchase life insurance policies.

How do all the different types of life insurance differ?

Term Life Insurance: You pay for this kind of policy on an annual basis, and after you die, the policy stops paying out. This is a good option if you need to cover your mortgage, a car loan or other debt that requires an annual premium. Term insurance is typically very inexpensive and will cover you for a set amount of time – anywhere from 5 to 30 years. As long as you pay the yearly premiums, your dependents will receive money after your death for up to a certain amount – this is referred to as the face value of the policy. Term policies have no cash value but are one of the cheapest ways to get life insurance coverage.

Whole Life Insurance: These policies cover you for your entire life and are the most expensive to purchase. This policy covers you from day one unlike term insurance, which only pays out after a certain amount of time (15, 20 or 30 years). It is important to note that whole life policies do not cover you from the moment you purchase them; instead they cover you after a specific number of years. If for some reason, for example, you stop paying your premium half-way through the year and die halfway through the year, your beneficiaries will not receive a payout until the end of the year. This can be a little confusing, but if you are able to afford the high cost of whole life insurance, it offers the coverage of term insurance without dropping your monthly payments as much.

Universal Life Insurance: This is a hybrid type of life insurance policy that combines both term and whole life into one policy term. It covers you for your entire life and pays a guaranteed amount of cash to you or your beneficiaries upon your death. Unlike whole life, this plan does not pay out during any of the years when you stop paying premiums. The face value is also much lower than other types of life coverage because the end value is based on how long you’ve had this policy in place versus when your beneficiary actually gets the balance paid out.

What are the most common questions people ask about life insurance?

Why do I need life insurance?

Most insurance companies offer a number of affordable options to provide you with coverage. However, if you have a family, or even just one dependent to consider, you may want to purchase whole life or universal life insurance. These policies are not only more expensive than term coverage, but they don’t cover you as long as term policies do and usually come with much higher premiums. You may also want to purchase these kinds of policies if your employer provides health care benefits and if you cover yourself through your medical expenses through other types of insurance such as disability or short-term disability plans.

How does life insurance work?

Life insurance is usually purchased as part of a larger policy. Life insurance policies are grouped differently depending on the kind of coverage you have: term, whole and universal life. The main difference between these policies is how they are paid out after your death. Term policies pay out a set amount for a certain number of years when you die (usually anywhere from 5 to 30 years). Whole life and universal life cover you for the rest of your life, meaning that if you don’t die within the first few years, premium payments will not be made to your beneficiaries. Instead, the insurer will keep a percentage of the money set aside in case you live longer than expected.

What are life insurance premiums?

Premiums are the amount of money you pay each year to keep your coverage active. Typically, the more coverage you want, the higher your premiums will be. Your annual premium is typically a percentage of how much life insurance you have purchased and may vary from 5% to 10%. This means that if you wish to purchase a $250,000 policy and pay for it over 15 years, your monthly premium could be as low as $6 per month. If term insurance is what works best for your lifestyle, you can usually find a low-cost policy that charges about $15 per month. However, the two most important factors in determining the cost of your policy is how much coverage you need and how long you want to pay the premiums for.

What can I do with my life insurance policy?

Some people like to change their life insurance policies when their needs change. For example, if you start a family and buy whole life because it covers you for your entire lifetime, but then decide that having a higher monthly payout from term insurance will allow you to pay off your mortgage faster, you could put your whole life policy into a cash value account where it sits until it reaches its highest value. At that point, you can take out a loan using your cash value as collateral for the loan.

If you sell your home and don’t have enough equity in it to pay down the loan from your life insurance policy, you can transfer the coverage into a life insurance trust for the benefit of your spouse. This allows you to keep coverage without having to sell your assets. Even if you only need a small cash amount, cash value can help pay off bills or make investments.

What are factors that can affect my life insurance policy?

Your age is one of the most important things to consider when purchasing new life insurance coverage. As people get older, their mortality rates drop. The older someone is when they die, the less valuable their life insurance becomes. If you want to purchase a policy when you are older, there are certain types of life insurance policies that can let you do this. However, these policies usually charge higher interest rates and premiums. They are also more difficult to get at certain ages because insurance companies may not issue them at those ages.

Where can I buy life insurance?

Life insurance is a big business in the United States, and it is sold by hundreds of companies. Your bank or credit union may even offer it as a service to its members. If they don’t sell traditional life insurance plans for individuals, they can usually refer you to someone who does.


When you choose a life insurance policy, it is important to know what kind of policy you are buying and why you are purchasing it. The type of policy you purchase is based on your needs as well as how much coverage you want compared to how much money you want to pay in premiums. Term insurance is the cheapest option and will also provide the most coverage. While it sits out there for a specific period of time before your beneficiaries receive any payments, when that time period has been reached, it will pay out a certain amount without requiring any more premiums from you.

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