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Life Insurance

How does life insurance work?
Each year, you pay the insurance company for your insurance policy, this money is called a "premium." You also tell the insurance company who should get the insurance money if you die (a process called "naming your beneficiaries"). Then, if you die while your policy is active, the insurance company will pay your beneficiaries the insurance money. Insurance companies can afford to do this because only a small number of people die each year, while many more people pay them premiums.

Why should you buy life insurance?
Life insurance protects your family in case something happens to you. Most people buy life insurance to make sure that their family still has enough money to take care of things after they die (like paying the mortgage and the cost of the funeral). If you buy "permanent" life insurance you can also save money for the future.

How much insurance should you buy?
Most experts recommend you buy a life insurance policy worth about seven times what you make in a year. So if you make $25,000, they would recommend about $175,000 in insurance ($25,000 x 7 = $175,000). If you make $40,000, they would recommend $280,000 ($40,000 x 7= $280,000).

But if you want a more precise number, you should contact me about what's right based on your situation.

 
 
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Key life insurance terminology

Accelerated Death Benefits: If you're very ill and either about to die or need long-term care, some life insurance policies will allow you to collect what would be your death benefit to help pay for your care.

Annuity: An annuity is a form of insurance that enables you to save for your retirement. You pay money to the insurance company for a set period of time, and when you retire, you receive money from the insurance company each month. There are many different forms of annuities, Most people who buy annuities are 55 or older. get information on how

Beneficiary: The person who receives the death benefit when an insured person dies.

Cash Value (or Surrender Value): In a permanent insurance policy, the cash value is the money that the policyholder can take out, either by canceling the policy or withdrawing the money early. However, if the money is withdrawn without canceling the policy, it can affect the amount of the death benefit. A policyholder can also use the cash value of a policy to pay all or part of a policy's premiums.

Death Benefit: The money paid to the beneficiary when the insured person dies.

Disability Waiver: A feature of some life insurance policies that, if you become disabled, will allow you to keep your life insurance without paying the premiums.

High Risk Insurance: The term for life insurance for people with health problems or whose jobs or activities (like sky diving) put them at greater risk for dying. Also known as "non-standard insurance." It costs more than regular insurance. Get more information on high risk life insurance.

Incontestable Clause: After two (or sometimes three) years, the insurance company can't cancel a policy or refuse to pay a death benefit, even if the policyholder lied or misrepresented the facts on their application. However, there are usually exceptions for factors like age and smoking that can enable the insurance company to reduce a policyholder's benefits (or raise premiums) even after two years have passed.

Insurable Interest: To take out a life insurance policy on someone, you need to have some family or financial connection to them (like you're a business partner). This is called an insurable interest and it prevents people from hearing that someone is sick and then taking out life insurance on that person.

Level Premium: An insurance policy where the premium stays the same every year

 

Insurable Interest: To take out a life insurance policy on someone, you need to have some family or financial connection to them (like you're a business partner). This is called an insurable interest and it prevents people from hearing that someone is sick and then taking out life insurance on that person.

Loan (or Policy Loan): If you have permanent insurance, you may be able to take out a loan based on the policy. If you fail to pay back the loan, the money is then taken out of the death benefit that goes to your beneficiaries.

Permanent Insurance: A form of insurance with no time limit that enables you to build up cash value. It's usually more expensive than term insurance, at least for younger people.

Premium: The money you pay the insurance company (usually each month, each year or twice a year) to provide you with insurance.

Renewal Term Insurance: A term insurance policy that allows you to automatically renew your insurance policy, without getting a medical exam or proving insurability. The premiums will almost certainly be higher when you renew (since insurance costs more as you get older), but it guarantees that you will be able to get term insurance (which is not always possible when you're older). Renewal term costs more than regular term.

Riders (or endorsements): Changes that are made to a policy.

Term Insurance: Insurance for a specific period of time (usually 1-30 years) that does not build cash value, it only pays a death benefit. It is usually much cheaper than permanent insurance, at least for younger people.

Universal Life Insurance: A form of permanent insurance that is relatively flexible because, within certain limits, you can change the amount of the death benefit, payments and payment frequency.

Whole Life Insurance: The most basic kind of permanent insurance. You normally pay a guaranteed premium and get a guaranteed death benefit and cash value build-up.