Life insurance is a contract between an individual and an insurance company, where the individual pays regular premiums in exchange for a lump sum payment to their beneficiaries upon their death. The purpose is to provide financial support to loved ones or cover debts and expenses left behind.
The main types are:
- Term Life Insurance: Provides coverage for a specific term (e.g., 10, 20, 30 years). If the insured dies during this term, the beneficiaries receive the death benefit.
- Whole Life Insurance: Provides lifetime coverage and includes a cash value component that grows over time.
- Universal Life Insurance: Similar to whole life but with more flexibility in premium payments and death benefits.
It depends on your financial obligations, dependents, lifestyle, and debts. A common recommendation is to have coverage that’s 10-15 times your annual income. Consider speaking to a financial advisor for personalized advice.
A beneficiary is the person or entity that will receive the death benefit. You can choose anyone, but people typically select spouses, children, or other close family members. Ensure your beneficiary designations are up-to-date and clearly stated.
The cost depends on factors like age, health, lifestyle, the type of insurance, and the amount of coverage. Term life insurance is generally more affordable than whole or universal life insurance.
Life insurance pays out a death benefit that can be used for anything. Common uses include paying off debts, covering funeral expenses, replacing lost income, or providing an inheritance.
Most life insurance policies cover death from any cause, but there are exceptions such as suicide within the first two years of the policy, death from a risky activity, or death from a pre-existing condition not disclosed at the time of application.
Yes, but it may be more expensive, and you might have fewer options. Be honest about your health during the application process to ensure your policy is valid.
You can apply through an insurance agent, directly from an insurance company, or online. The process usually involves filling out an application, answering health questions, and possibly undergoing a medical exam.
It depends on the type of policy. Term life policies are generally not flexible, but whole and universal life policies may allow changes to premiums, death benefits, and other terms.