Life Insurance Basics

Today we will cover some life insurance basics or as we would jokingly call it "Life Insurance 101". We hope this helps explain the basics of how life insurance works. If you are interested in a Life Insurance Quote Click Here.

Life Insurance Basics

Here are just some basics about life insurance that will help you understand how term life insurance, universal life insurance, and whole life work. These are really basic concepts and I know some people will disagree with my opinions below, but I feel these are life insurance basics and concepts that 97% of the people who purchase life insurance should adhere to.

Term Life Insurance
  • Covers a specific term or period
  • Typically 10 – 30 Years (ROP is an option)
  • Much less expensive for term than UL, WL unless over the age of 50
  • Protection from hardship (Cover existing debt or future obligations)
  • Benefits: more affordable, easier to understand, most common form of life insurance purchased
  • Premiums are locked during the period of time in the policy. After that they can keep the policy but premiums increase drastically.
Whole Life Insurance
  • Combines a term policy with an investment vehicle
  • Lasts your whole life (don’t have to worry about a specific period of time)
  • Universal Life is becoming much more common (small cash value – lasts till 120)
  • Price – Term then UL then Whole Life
  • Long term need for insurance, want to accumulate cash value to borrow against
  • Benefits: premiums don’t increase with age, builds cash value, lasts your whole life as long as premiums are paid
  • This can be a good idea for estate planning; very complicated though and probably not something an individual would purchase online – usually through financial planners.

Most of the time term life and investing the difference is the wisest approach. The problem with this approach is people do not invest the difference or only invest when the difference is convenient. My suggestion is to invest more to your 401k with before tax dollars prior to purchasing a life policy with after tax dollars. This is "Life Insurance Basics".

Paramed - the older you are the more they will want to test. Had a 72 year old client that had to get an EKG on the conference room floor. Blood is common even for younger individuals with higher face amounts; urine is just about a guarantee for over $100k.

Life Insurance Questions

When someone comes into our office these are the basic questions I ask people when they say they would like to purchase life insurance:
  1. Why do you want to purchase this policy? Debt, Investment, Leave money for kids?
  2. How long do you need the coverage?
  3. How much can you afford to pay?
  4. How is your health?
  5. No one ever gives an accurate answer here.

Medicare Insurance Finders offers free online insurance quotes for life insurance and Medicare Supplement Insurance.