5 Things You’ve Always Wanted to Know about Life Insurance

Data from the Life Insurance and Market Research Association (LIMRA) shows that just over 60% of Americans have some form of life insurance. Although that’s good, the numbers are down from just a few decades ago. Among those who do have insurance, most don’t have enough to cover their needs.

It could be that the lack of adequate life insurance coverage is just the result of a lack of education. People don’t buy life insurance because they don’t understand what it is or how it should be used. This post represents an opportunity to change that for you. Below are answers to five of the most commonly asked questions regarding life insurance.

1) What is the purpose of life insurance?

Life insurance is intended to do two things. First, it covers funeral and burial expenses. With the average funeral now running around $6,000 in the U.S., not having a life insurance policy in place could leave your family members with a hefty bill to pay at your death. As for the second purpose, life insurance is also intended to temporarily replace lost income. A good policy can keep your family going financially for a time should you die while you’re still of working age.

2) What is term life insurance?

Life insurance policies in the U.S. can be divided into two main categories. The first is term life insurance. This kind of insurance takes its name from the fact that it remains in effect only for the designated term. For example, say you have a 20-year policy. You would pay monthly premiums with the expectation that the policy would pay out should you die at any time during that 20 years. The policy expires at the end of the term.

3) What is whole life insurance?

Whole life insurance remains effective throughout your entire life. You may only make monthly premium payments for 20 years, but the policy would continue even after those payments concluded. Whole life insurance policies act as investments because of their unique structure. Part of the money you pay in premiums is invested on your behalf, increasing the return of the policy at your death.

4) What is final expense insurance?

There is a specialized form of life insurance often referred to as final expense insurance. This kind of insurance provides just enough money to pay funeral and burial expenses. Policies are generally accessible to anyone regardless of age or health, so seniors who are not eligible for a term or whole life can still get enough insurance to pay their final expenses.

5) At what age should a person buy insurance?

Life insurance is appropriate at every age. However, it’s best to purchase a policy as soon as a person becomes a legal adult.

Starting early by investing in a whole life policy maximizes the amount of time your policy has to mature and grow. Assuming you live to average age expectancy, a whole life policy could produce a very tidy return to pass on to children or grandchildren.