Life Insurance Awareness Month Reminds Us to Know All We Can About Life

Category: Personal Insurance

September 2013 marked the 10th anniversary of Life Insurance Awareness Month (LIAM). LIAM seeks to raise awareness among consumers and insurance professionals about the need for life insurance. Unfortunately, the anniversary finds Americans with disposable income at an all-time low, and families being forced to make difficult decisions about their financial priorities. Life insurance often doesn’t make the cut.

If you have chosen to go without life insurance—or maybe you only have a small policy—you might want to reconsider. Life insurance is more than just a financial investment. It gives your loved ones time to grieve, helps pay off debts and loans that you leave behind, and provides your remaining family members with financial stability after you are gone.

Life Insurance Basics Everyone Should Know

Life insurance makes us ponder the ramifications of our own mortality. While unpleasant, it is necessary to at least know the basics so you can begin to make an informed decision about your own life insurance needs.

Life insurance is a contract with an insurance company. In exchange for payment from you (premiums), the insurance company provides a lump-sum payment (death benefit) in the event of your death to beneficiaries you have chosen.

There are many options to consider when choosing a life insurance policy. The best one is that which meets your needs and goals. Consider the following:

  • Do you need to replace your income for your spouse and dependents after your death?
  • Will your spouse or dependents need to pay debts that you have left behind?
  • Will your loved ones need to pay for your final expenses?
  • Will real estate taxes be due?

The proceeds from a life insurance policy make cash available to support your family almost immediately upon your death. In addition, they can pay your debts, final expenses and real estate taxes, and even be a source of inheritance for your heirs.

Types of Life Insurance

There are two main types of life insurance: term life insurance and permanent life insurance. There are several varieties of both.

Term life insurance provides financial protection for a specific period of time, such as 10, 20 or 30 years. Premiums for term life are level and guaranteed for that time period, and then may be continued after the time period but at a much higher premium. Term life is ideal for people looking to pay some final expenses and provide income replacement for their spouse and dependents.

Permanent life insurance includes an investment component as well as an insurance component. Whole life, universal life and variable life are all examples of permanent life insurance. These types of policies generally have much higher premiums than term life because you are funding an investment account and paying additional fees and expenses. Permanent life insurance is very complex and offers many possible outcomes throughout the life of the policy.

How Much Life Insurance Do I Need?

The amount of life insurance you need depends on many factors, including but not limited to:

  • Marital status
  • Family size
  • Current and future financial obligations
  • Career stage
  • Current and future goals

As these factors change, your life insurance needs will change as well.

The cost of life insurance depends on the amount of coverage you need, the type of policy you purchase, your age, your health and other lifestyle factors (smoking, risky activities, etc.).

Life insurance is very complex. If you already have a policy, you should review it with your qualified insurance agent at least every five years. If you are considering it, seek counsel from an experienced United Agency representative.

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