Life insurance is an essential part of any financial strategy. It provides a death benefit to help protect the most important people in your life. It can replace income for dependents, create inheritances, provide charitable contributions, and much more.
What is life insurance?
It’s a way to leave money to the people you care about most to cover anything — replacing income, funeral costs, help with mortgage payments, educational expenses and more.
How does life insurance work?
You make regular payments and the life insurer pays a benefit to your beneficiaries after you die. Depending on your policy, life insurance can also provide living benefits.
How can you use life insurance?
It does more than protect your loved ones. It can help you pay less in taxes, get money if you get sick, act as a source of supplemental retirement income1, or even help protect a small business.
What life insurance terminology do I need to know? If you want to improve your understanding of life insurance, knowing what the terminology means is a great place to start. Here are some of the terms you should be familiar with:
Premiums These are the payments you make to the insurance company. For term life policies, these cover the cost of your insurance and administrative costs. With a permanent policy, you’ll also be able to allocate these payments into an account that has cash value. Beneficiaries The people who receive money when the covered person dies. Beneficiaries are often spouses, children or parents, but they can also be friends, charitable organizations or others that you may choose. Death benefit The total amount of money the beneficiaries receive when the covered person dies. You choose a cash value when you buy a policy, and the amount is sometimes — but not always — a fixed value. Permanent life insurance can also pay additional money if the cash account has grown, and you selected certain options for your policy. Riders These are optional additions you can make to your life insurance to provide specific coverages and tailor your policy to your needs, such as providing benefits if you become chronically ill or disabled, need additional death benefits, cash value or estate planning assistance. Some riders are available for an additional cost.
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