Life Insurance Basics

Julia Carlson |

Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person. A good rule of thumb is to get life insurance so that it covers 10 times the amount of your income. You should consider term insurance that is typically 20 years in length, especially if you have young children. After that time, the insurance terminates. Even though you will most likely live past the 20 years, and you don't get any money back, if you're healthy the premiums are inexpensive. This form of insurance should be considered like health and car insurance. Hopefully you do not need it, but your family and dependents will be protected if you die. Keep in mind the cost of coverage will increase as you get older, so lock in a price when you are young. You can evaluate when your term has ended as to whether or not you want to renew at a higher premium.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges.  You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments. You certainly don’t want to outlive your insurance company!

To find out more information and to assess your life insurance needs please use this calculator at my website.

Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision. State insurance laws and insurance underwriting rules may affect available coverage and its costs. Consult an insurance professional or visit your state’s insurance department for more information.

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