What is life insurance?
• A: Life insurance is a contract, often called a “policy”, between you and an insurance company to provide money to a person you designate, in the event that you die during the time the contract is in force. In essence, during your lifetime you pay money, known as the insurance “premium”, to the insurance company. It promises to pay money to the persons you name, the “beneficiaries”, at your death.
Life insurance can be a financial resource for your loved ones in the event of your death. You enter into a contract with an insurance company, which promises to provide your beneficiary(ies) a certain amount of money (commonly called a “Death Benefit”) upon your death. In return, you make periodic payments, known as premiums. The amount of the premiums generally depends on factors such as age, gender, occupation, medical history and whether you intend to build up cash value in your policy. Some life insurance policies require a medical exam.
A. Life insurance offers a way to replace the loss of income that occurs when someone dies. It is a contract between you as the insured person and the company or “carrier” that is providing the insurance. If you die while the contract is in force, the insurance company pays a specified sum of money free of income tax to the person or persons you name as beneficiaries. A good life insurance program does more than just replace the loss of income that occurs if you die. It should also provide money to cover the new costs that arise after your death. And these cash benefits should provide for your family’s future needs as well, including college education for your children or part of all of your spouse’s retirement needs. In almost all cases, your beneficiary can use the cash benefits in the way he or she sees fit, without restriction.
Life insurance offers a way to replace the loss of income that occurs when someone dies. It is a contract between you as the insured person and the company or “carrier” that is providing the insurance. If you die while the contract is in force, the insurance company pays a specified sum of money free of income tax to the person or persons you name as beneficiaries. A good life insurance program does more than just replace the loss of income that occurs if you die. It should also provide money to cover the new costs that arise after your death. And these cash benefits should provide for your family’s future needs as well, including college education for your children or part of all of your spouse’s retirement needs. In almost all cases, your beneficiary can use the cash benefits in the way he or she sees fit, without restriction. When you receive a life insurance quote, be sure to compare the benefits in addition to the lump sum payout.
