What Is Life Insurance?

Life insurance is a financial agreement or contract that the insurer makes with a policy owner. In the case of a life insurance policy, the insurer is promising to pay out a monetary amount to a designated beneficiary in the event of the death of the insured.

While the insured is living, they agree to pay monetary premiums in order for the policy to remain in force.

Why Should I Get Life Insurance?

Far too many people these days ignore the idea of getting a life insurance policy. Perhaps they don’t want to face the idea of leaving loved ones behind, or maybe they feel that they don’t have enough material assets that would merit purchasing a policy.

However, there are many reasons why someone should consider buying life insurance:

1. Protect Your Family Financially: If you are supporting others in or out of your household, they depend on your income. If you die without a life insurance policy in place, if there is no savings left behind, they will have to fend for themselves to care for the mortgage, child care, household debt, college expenses, etc.
2. Pay for Funeral Expenses: If a tragic event occurs, the last thing the family wants to worry about is caring for the expense of funeral arrangements. The costs can be tens of thousands, adding further burden to an already difficult time.
3. Probate and Administrative Costs: Sadly, there is a hefty amount of paperwork and administrative work to properly care for someone’s assets, and the process can be lengthy. If probate or estate administrative costs are involved, these all come with fees.
4. Inheritance for Designated Beneficiaries: Perhaps you have no house or other monetary assets to leave behind. A life insurance policy can serve as a way to leave an inheritance to a named beneficiary.
5. Pay off Debts: Perhaps one incurred a lot of medical expenses, or had a family business with many expenses. Life insurance can help your loved ones pay off debt that you accrued.

What Life Insurance Type should I look into?

Each person and family has specific and varying circumstances. There is usually a life insurance policy type that can meet most needs of a potential insured.

• Whole life insurance
• Term life insurance
• supplemental insurance
• credit life insurance
• universal life insurance
• survivorship life insurance
• variable life insurance
• mortgage life insurance
• burial/funeral insurance

Whole life insurance:

This type of life insurance (also known as traditional life insurance) is best for people who want a permanent policy that will cover them for a lifetime. On top of that, this type of policy builds cash value and accrues interest. Because of the type of financial guarantee the insured is getting, this life insurance type is more expensive than other types.

Term life insurance:

This life insurance type only lasts for a specific amount of years. The insured can choose a 5,10,15,25, or 30 year policy period. After the term is up, the insured can renew, but the rate will increase each time. However, it is one of the cheapest ways to purchase a life insurance policy and is helpful for people who just want to cover a specific debt, cost of a mortgage, lost income, etc.

Supplemental life insurance:

Supplemental life insurance is a life insurance type that is typically offered through one’s employer. It’s often free or very inexpensive. However, it sets rates based on the group, not you as an individual, and this insurance type will be lost if you end employment with the one providing that insurance.

Credit life insurance:

This insurance type covers a specific debt or loan in the case of your death. This payout goes directly to the lender and not the family however, so it is a much more rigid life insurance type.

Universal Life Insurance:

A tricky life insurance type to understand, as this kind of policy is very similar to whole life insurance in the sense that it offers lifelong coverage. However, while it is a permanent life insurance type, it doesn’t offer the same guarantees as typical whole life insurance policy. It will be important to keep yourself apprised of what’s going on with the policy to know what fees are involved, to prevent lapse, the current cash value, etc. For this reason, this life insurance type tends to be cheaper than whole life insurance.

Survivorship Life Insurance:

Also known as “second to die life insurance,” survivorship life insurance is a life insurance type that covers two people under one policy and only pays out the death benefit once both under the policy have died. Therefore, it’s a good type of life insurance for couples trying to leave something behind for their children or grandchildren. This wouldn’t be the best choice if one spouse is looking for a policy to help out their surviving spouse financially, as it only pays out when both on the policy are dead.

Variable Life Insurance:

This is a permanent type of insurance policy which carries a cash value and guaranteed death benefit as long as you pay the premiums. This differs greatly from other life insurance types because the premiums are invested into sub accounts. Therefore, there is a big risk involved. If the market does well, your cash value will grow, which makes this type of policy appealing. However, if the market crashes, the policy’s cash value plummets as well.

Mortgage Life Insurance:

Just as it’s name implies, this life insurance type is specifically for the purpose of taking care of any mortgage debts and costs once the insured dies. It will only pay out the benefit if the borrower dies AND the mortgage is still in existence. Since the policy is designed to pay off a mortgage loan, the designated beneficiary must be the mortgage lender. Therefore, if you are looking for a life insurance type that would provide your loved ones with a cash amount after you die, this type of policy would not be the best fit.

Burial/Funeral Insurance:

This is another very specific life insurance type. Burial or funeral insurance is meant to pay for the costs of your final arrangements whether that be a burial, cremation, etc. It can even cover things such as medical bills, outstanding debt, or other legal costs. This type of policy does not require one to get a medical exam, and is easy to get. The death benefit will be used by your designated beneficiary for all funeral expenses, and while they can also get any leftover cash not used for the final arrangements, it is not often a large amount.

What’s the difference between Whole Life Insurance vs. Term?

While this was briefly explained above, whole life insurance and term life are the most commonly purchased life insurance types, and it’s important to know the difference.

Whole life insurance is permanent, and term life is temporary.

While one might wonder why bother with a temporary life insurance policy, many people are drawn to a term life policy because it is cheaper. Additionally, it is very simple to understand and you can choose the length of the term to fit your potential needs.

Whole life insurance is much more expensive. Also, if you don’t pay premiums on it, the policy could lapse leading to charges and fees. However, it is very appealing because the coverage is meant to last a lifetime and the death benefit is guaranteed. Another benefit, is that the policy cash value grows in interest.

whole life vs term life

Which insurance companies offer Life Insurance?

A Plus Insurance specializes in auto and home insurance products, but we can point you in the right direction if you need to purchase a life insurance today.

When choosing a company, look out for things like it’s AM Best Financial Strength rating and the JD power customer satisfaction rating.

Highly rated insurance companies show you that they are reliable and can honor their financial obligations. According to businessinsider.com, some of the best life insurance companies are:

• State Farm
• Northwestern Mutual Life
• New York Life
• Nationwide
• MassMutual Life Insurance
• Guardian Life Insurance

While you can call these companies directly and set up an auto policy, it is highly recommended to use an insurance broker.

Why bother using a third party?

They can help save you loads of money! They are trained to shop through multiple insurance carriers, saving you time, and know how to find you the best fit for your circumstances and budget.

We have helped compiled a list of local agents who specialize in life insurance.

Life Insurance Brokers In Colorado

Is State Minimum Home and Auto Insurance Coverage Sufficient?

• Pro: State Minimum Coverage is Affordable
  State minimum insurance typically offers the most affordable premium options, making it a budget-friendly choice for many drivers and homeowners. However, it may not provide adequate coverage in the event of major accidents or disasters. Text Us for affordable alternatives.
• Con: State Minimum Auto Coverage May Not Cover All Damages
  While state minimum auto insurance meets legal requirements, it often doesn’t cover the full cost of repairs or medical expenses in severe accidents. Additional coverage may be necessary to avoid significant out-of-pocket expenses. Call us at 1.888.445.2793 to explore your options.
• Pro: Meeting Legal Requirements for Insurance
  State minimum insurance ensures compliance with legal requirements in your state, helping you avoid fines or penalties. For more information on meeting your state’s insurance mandates, Text Us.
• Con: Limited Protection for Homeowners with State Minimum Coverage
  For homeowners, state minimum home insurance may not cover significant risks such as natural disasters, theft, or liability claims. Upgrading to more comprehensive coverage can offer better financial security. Call us at 1.888.445.2793 to discuss enhanced protection.
• Con: Out-of-Pocket Costs Can Be High After an Accident
  With only state minimum coverage, you may face high out-of-pocket expenses if you are involved in a major accident or if significant damage occurs. For better protection against unexpected costs, Text Us to review full coverage options.

• Progressive Home & Auto Bundle: Offers significant discounts when you combine home and auto insurance. New homeowners can enjoy competitive rates, comprehensive coverage, and the added convenience of managing both policies through one provider. Call us at 1.888.445.2793 to get a quote.
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• AssuranceAmerica Home & Auto Insurance: Specializes in affordable options for new homeowners and first-time car owners. AssuranceAmerica provides great coverage at competitive rates, with additional benefits like 24/7 claims support and online policy management. Call us at 1.888.445.2793 to see how much you can save.
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Last Updated on December 6, 2024 by Brian Muse