LIFE INSURANCE – Caplifeagency.com

What is life insurance?

Life insurance allows you to leave money to those you care about in the case of your death.
At its most fundamental, it is an agreement between you and a life insurance provider. You agree to pay them in exchange for insurance coverage. Consider it like a subscription service: as long as you pay your premiums, you’ll be insured. What is covered? That entirely relies on you. Perhaps you want to ensure that your spouse can pay for kids’ college or mortgage regardless of what happens to you.

Terminologies

Premiums refers to the amount of money you pay in exchange for coverage.

The coverage amount (also known as face amount, death benefit, or payout) is the amount of money that goes to your people (beneficiaries) if you die. You set it in advance when buying a policy, and it generally passes to them tax-free.
Beneficiaries are the people who will receive the coverage amount.
The term is the length of time your policy will be in effect for — usually 10, 15, 20, 25 or 30 years, but you can also choose to be covered for your entire life, it’s called whole life or permanent insurance.
Filing a claim refers to the process by which your beneficiaries can claim the coverage amount if you die.

Do I need life insurance?

Now that you know the fundamentals, you may be wondering if you need life insurance. To know out, consider the following: would your absence cause someone financial hardship? If you answered yes, you require life insurance. Let’s look at the top five reasons why you might need life insurance.

1. You contribute a meaningful portion of your family's income

Consider life insurance to be a means of replacing your income if you die within the period of your policy. If you support (or will support) a spouse, children, parents, grandparents, siblings, or others and the loss of your income might impair their ability to pay for necessities such as food, housing, or daycare, you should consider purchasing life insurance.

2. You have kids

Anyone with children, regardless of income, should consider purchasing life insurance. Even if you don’t have lost money to replace, you almost certainly give care that your family would have to pay for if you weren’t there. Life insurance can also significantly help with college finances.

3. You have a mortgage or other shared debt

If you have a loan on which someone else has co-signed, they may be obligated to complete the entire installments if you die. Consider purchasing life insurance if a parent has co-signed a school loan for you, or if you have a mortgage, personal loan, or home equity line of credit with a spouse, partner, or sibling.

4. You run a business

Life insurance can be extra important for small business owners. You might have taken on business debt using personal assets, like your home, as collateral. In that case, life insurance can help pay off debts that your family might otherwise have to cover.

Plus, if you co-own the business, a life insurance policy where your business partner is the beneficiary can allow him or her to buy out your share from your heirs at a price you decide on now. That can prevent a scenario in which your partner isn’t able to afford taking on your share of the business, and your children are left without income from the business or the proceeds from your portion’s sale. You may want to consult with an attorney to ensure this is set up appropriately.

5. Your life insurance through work isn't enough

If you’re like most individuals, you undoubtedly chose life insurance via your job at some time. Perhaps it was your first job, and it was a simple, no-brainer check box. Or perhaps you still have employer-provided coverage but haven’t given it any attention.

While choosing an employer-provided plan may be a beginning step toward developing a balanced financial plan for yourself, it may not provide the level of security that you and your family require. And it may end up costing you more in the long term than purchasing an individual coverage.

Discover why you should think about getting your own coverage.

You can get a tailored amount of coverage.
It’s more affordable than you think.
You’re in control of your coverage, not someone else.

None of the above apply?

If you are not in any of these categories, you may not need life insurance right now, but you should reconsider when substantial life events occur, such as when you take on debt. Also, obtaining life insurance while you’re younger might help you lock in a lower price. We’ll get to it in a minute.

How does life insurance work?

As previously stated, life insurance operates on a subscription basis: as long as you pay premiums, you will be insured. That implies that if you die, your beneficiaries get money (tax-free), but it’s important to note that claims might be disallowed for a variety of reasons, i.e substantial miss representation, which is basically just not being honest on the application and/or claim. (basically, not being honest on the application or the claim).

The amount you will pay in premiums is determined by three major factors:
Your individual qualities (age, health, gender, etc.)

The type of life insurance you select, typically term versus permanent (more on that next)
Your policy’s coverage amount/size (how much money you want to leave your beneficiaries)
When you apply for life insurance, the firm will collect all of that information in order to calculate your premium. This is known as “underwriting.”

Quick Takeaways

If your absence would cause someone financial strain, it’s a good idea to get life insurance. Life insurance is an agreement between you and a life insurance company: you agree to pay a monthly premium and, in turn, you’re provided coverage. In the event of your death, your beneficiaries will receive your coverage amount, tax free.

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What is life insurance?

Terminologies

Do I need life insurance?

1. You contribute a meaningful portion of your family's income

2. You have kids

3. You have a mortgage or other shared debt

4. You run a business

5. Your life insurance through work isn't enough

You can get a tailored amount of coverage.

It’s more affordable than you think.

You’re in control of your coverage, not someone else.

None of the above apply?

How does life insurance work?

Quick Takeaways

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