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Life insurance defined

Posted August 27, 2014 in Advice Column, Beaverdale

I’m here to help you get smarter about your insurance. After all, the more you know, the better you can plan for what’s ahead. Below you will see some explanations on life insurance and the different policies that are out there. I’ve tried to really break it down to keep it simple, but please reach out to me with questions.

• Life insurance: A protection against the loss of income that would result if the insured passed away. The beneficiary receives the proceeds and is safeguarded from the financial impact of the death of the insured.

The life insurance industry loves its jargon. And unless you’re around it every day, as I am, there is a strong possibility it might leave you scratching your head. These definitions can help minimize confusion.

Many of us don’t really understand the importance of life insurance — until we need it. If something happens to you or your partner, life insurance can help cover the loss of that person’s income. Simply put, life insurance comes in two basic types: term and permanent.

• Term life insurance: Provides coverage for a set period of time and is usually less expensive. It provides the greatest amount of coverage for the lowest initial cost. It’s a good choice for your temporary needs or if your funds are limited. It’s affordable, temporary, and renewable or convertible to permanent coverage.

• Permanent life insurance: Includes whole life and universal life. This is useful when you want to cover a long-term need like income for a spouse, an inheritance for children or end-of-life expenses. Permanent insurance costs more initially, but can accumulate cash value.

• Whole life basics: It’s good for young adults just beginning an insurance program and for families needing protection while saving for the future. Cash value of a whole life policy accumulates at a guaranteed interest rate.

• Universal life basics: Flexible coverage that has options for timing and method of premium payment. It’s tailored coverage to fit your personal needs.

Many insurance companies offer discount for combining your auto and homeowners/renters policy with a life insurance policy. Make sure to ask about these when shopping.

As with most specialized products, we highly recommend that you find a salesperson who can guide you through the process from the beginning step through servicing it for years and years to come.

Information provided by Larry G. Novak, Novak Agency of Farmers Insurance





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