What Is Life Insurance?

Insurance is an important safety net in many ways, including insurance for our lives. A life insurance policy makes sure that your loved ones and beneficiaries are well cared for upon your passing, whether it’s sudden or anticipated. Life insurance varies depending on the type of coverage, the insurer, and the amount of coverage you are seeking to take out. Let’s take a closer look at some of the insurance options that may be available to you.

Whole Life vs. Term Life Insurance

You may be asking yourself, what is life insurance? Life insurance is a lump sum of money that is paid out upon your death. The money is given to people you’ve selected as beneficiaries of the policy and is used by them as instructed in your will or as they see fit. Life insurance is commonly broken down into two forms: whole life policies and term life policies. A whole life insurance policy provides coverage for just that, your whole life. While this is usually the more expensive option, you can lock in a set premium at the time you sign up for your policy. You can also build cash value on a whole life policy, borrowing against the death benefit if needed.

A term life insurance policy covers you for a set period of time. These policies usually are given for 10 or 20 years and, while the more affordable option, do not allow you to borrow against the death benefit. These term policies can be renewed upon expiration, or you can stop paying the life insurance premium and purchase another policy.

Other Life Insurance Products

Beyond whole life and term life insurance, there are other insurance products available for life coverage. Total and permanent disability insurance, or TPD, provides financial support to you and your family in the event that you sustain a permanent illness or injury devastating your ability to work and your financial security. TPD applicants receive a lump sum if they’re totally and permanently disabled.

Income protection insurance can pay up to 70 percent of your pretax income for a set time period if you’re unable to work due to a partial or total disability. There’s also trauma insurance, or critical illness insurance, that provides life insurance coverage if you become critically ill or seriously injured. You’ll receive a lump sum amount in those events, such as if you suffer a heart attack or stroke. These insurance products may come with an additional cost, but you should evaluate the terms and conditions of these policies as you would for your standard life insurance policy.

Health and Other Factors in Premiums

There are ways to save on your life insurance coverage beyond just opting for a cheaper term life policy as opposed to whole life insurance coverage. One way to adjust your insurance rates is by making changes to your health. Historically, the lesser risk you are, the lower your premiums for your life insurance policies. This is why it’s recommended that even young people invest in a term life policy that they can afford, as they’ll get a good rate being in prime health. There are also discounted rates for non-tobacco users compared to those who smoke.

With these different types of coverage, it’s important to look into the different benefit tiers. For example, it will cost you more for $50,000 in permanent coverage, as opposed to a $25,000 whole life insurance policy. A physical exam by your medical care team that is submitted to your insurer is a good way of adjusting rates accordingly for better insight into the risk. There are policies available that don’t require an exam, but those anonymous policies tend to cost the insured more. Keep in mind that life insurance of any kind is a good option to have.


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