life insurance info

Life Insurance Information

How life insurance works

 Life insurance is a contract between you and an insurance company to provide you with coverage based upon your payment of premiums. Life insurance provides a death benefit to your named beneficiary upon your unfortunate death. When you pass away, your beneficiary files a claim with the insurance company to submit proof of your passing. After the insurance company receives all the documents, then your beneficiary will be issued the death benefit payout.  

Need a more in-depth explanation? Feel free to ask.

Vocabulary

 

  • Beneficiary:  
    A person who derives advantage from something, especially a trust, will, or life insurance policy 
  • Cash value:
    A form of permanent life insurance that features a cash value savings component. The policyholder can use the cash value for many purposes, such as a source of loans, as a source of  cash, or to pay policy premiums.
  • Convertible Insurance:
    Convertible insurance is a type of life insurance that allows the policyholder to change a term policy into a whole or universal policy without going through the health qualification process again.      
  • Coverage Period:
    The period of time the life insurance covers the policy-holder.  
  • Death benefit:
    The life insurance money that is paid to the beneficiary.  
  • Dividends:
    A refund of a portion of the premium paid by the insured from insurer surplus. 
  • Premium:
    The amount of money paid as either a single payment or periodic payments to maintain insurance coverage.  
  • Rider:
    An add-on to the primary policy, which offers benefits over and above the policy subject to certain conditions.   
  • Underwriting:
    The process used by insurance companies to determine how much life or other types of insurance a person can qualify for and at what price,  based upon risk factors.  

The Basics

 

  • Life insurance can replace the income for those dependent on the income of the insured person. A common example of this is parents with young children. The policy will last until a certain age or for a certain period of time. When the term is up, you can renew your policy or let it end.  
  • Life insurance can pay funeral and burial costs, debts and medical expenses not covered by  health insurance.
  • Life insurance benefits can pay for estate taxes so that heirs will not have to liquidate other assets or take a smaller inheritance.
  • By making a charity the beneficiary of a life insurance policy, individuals can make a much larger contribution than if they donated the cash equivalent of the policy’s premiums. 
  • Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request. Buying a cash-value type policy can create a savings plan. 

Types of Life Insurance

 

  1. Term Life
    Is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. There are two basic types of term life insurance policies. Level term means that the death benefit stays the same throughout the duration of the policy. Decreasing term means that the death benefit  drops, usually in one-year increments, over the course of the policy’s term.  
  2. Whole Life/Permanent Life
    Whole life or permanent insurance pays a death benefit whenever the  policyholder dies. There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.
    In the case of traditional whole life, both the death benefit and the  premium are designed to stay the same (level) throughout the life of  the policy.
  3. Universal Life
    Universal life insurance is permanent life insurance with an investment savings element and low premiums like term life insurance. Most universal life insurance policies contain a flexible premium option. However, some require a single premium or fixed premiums.  
  4. Variable Life
    Variable life policies combine death protection with a savings account that can be invested in stocks, bonds and money market mutual funds. The value of the policy may grow more quickly, but involves more risk. Some policies, however, guarantee that the death benefit will not fall below a minimum level.  

Life Insurance for family

We know how unsettling it can be to think about life after you're not here. That's why we do everything we can  to ensure your loved ones receive the best life insurance coverage.


Life insurance for retirement

Concerned about life after you stop working? Let us help you find the right plan that fits your needs. No need to worry when your life insurance policy can add financial supplementation.

Life Insurance for college

College is expensive. We'll help you explore the options  life insurance provides for your children and grandchildren.

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Frequently asked

How does the insurance company know if I died?

The beneficiary of the policy has to file a claim to the company. The death certificate of the insured is sent to the company.

Do I still need life insurance if I have it through my job?

Yes, most of the time life insurance signed up for through your employer is not enough. You also lose that coverage if you stop working.

Do I have to take a medical exam?

Yes, most of the time a medical exam is needed for determining your monthly premiums for your policy. No-exam policies usually offer less coverage.

What is a death benefit exactly?

 It's the amount of money that the policy is worth. This lump sum is payed out when the insured has died. 

Does Compare Life Insurance employ brokers or agents?

Life insurance brokers. We're not tied down to an insurance company. We work with an assortment of companies to find the best deal.

What's the difference between a broker and an agent?

A broker works on behalf of the insured while an agent works on behalf of insurance companies.