Having a life insurance policy is crucial for providing financial security for your loved ones in the event of the insured’s passing. In this blog, we will go over what life insurance is, what affects your costs, the different plan types, and the benefits.
What Is Life Insurance?
Life insurance is a contract between an insurance company and a policy owner, where the insurer guarantees to pay money to the named beneficiaries when the insured person passes away. For a life insurance policy to remain in force, the policyholder must pay regular premiums during their lifetime.
What Affects Your Life Insurance Costs?
Many factors can affect the cost of your premium, including things out of your control. The most important factors are your health and age, so it’s advised to buy life insurance as soon as you can. Other factors include the following:
- Gender
- Health
- Tobacco use
- Driving record
- Family medical history
- Lifestyle
Once you’re approved for a policy and you believe your health has improved, you can request to be considered for a change in risk class. If you’re found to be in better health, your premium may decrease, and you may be able to buy additional coverage at a lower rate than before. Fortunately, if it’s found you’re in poorer health than the initial underwriting, your premium will not increase
Types of Life Insurance
There are different types of life insurance available for various needs and preferences. It’s important to consider whether to select temporary or permanent life insurance depending on the person's short-term or long-term needs.
Term Life Insurance
Term life insurance is designed to last a certain number of years (most commonly 10, 20, or 30 years), and then end. There are a few variations of term life insurance to consider:
- Decreasing term life insurance coverage decreases over the policy's life at a predetermined rate.
- Convertible term life insurance allows policyholders to switch from a term policy to permanent insurance.
- Renewable term life insurance provides a quote only for the year the policy is purchased, so this is the least expensive term insurance initially, but premiums increase annually.
Permanent Life Insurance
While permanent life insurance is more expensive than term, permanent stays in effect for the insured's entire life (unless the policyholder stops paying the premiums). Similar to term life insurance, there are different kinds of permanent life insurance, including the following:
- Whole life insurance lasts your whole lifespan and includes a component similar to a savings account, called cash-value life insurance. This allows the policyholder to use the cash value for different purposes, such as loans or premiums.
- Universal life (UL) insurance also has a cash value component, however, this one earns interest. Unlike term and whole life insurance, UL premiums are flexible, can be adjusted over time, and are designed with a level or increasing death benefit.
- Indexed universal life (IUL) insurance lets the policyholder earn a fixed or equity-indexed rate of return on the cash value component.
- Variable universal life (VUL) insurance allows the policyholder to invest the policy’s cash value in an available separate account. Like a UL plan, VUL has flexible premiums and can be designed with a level or increasing death benefit.
Benefits of Life Insurance
There are many benefits to having life insurance. Buying life insurance protects your family from potentially devastating financial losses if something happens to you. It provides financial security, as well as helps pay off debts, living expenses, and any medical or final expenses. Additionally, the policy payment your family receives is generally not subject to federal income taxes, so a policy of $150,000 provides $150,000 of death benefits proceeds to the beneficiary.
Life Insurance with GEA
At GEA, we know the importance of life insurance for you and your loved ones. Our life insurance plan is designed to offer comprehensive coverage tailored to your needs. With GEA, your family’s financial future is in good hands, allowing you to live life to the fullest without any worries. Take the crucial step of ensuring your family’s financial security today with our reliable and supportive life insurance plan. Get a free quote today.
