What Is Life Insurance?

Life Insurance Definition

Life insurance pays a set benefit amount to named beneficiaries in the event of the insured’s death, and with some policies, disability. Life insurance is typically granted after a series of medical questions and examinations is conducted, although some policies waive these or insure anyone regardless of medical history.

The most basic life insurance policy is term life. This type of policy pays a set benefit if the insured dies within a set period of time, and is generally the cheapest available policy. Permanent life insurance is usually the best coverage to purchase, as it covers the insured for their entire life and can offer financial benefits. Universal life insurance offers investment options within the shelter of a life insurance policy, and is typically used for advanced estate planning.

Example

Henry and Julia are having their first child, and want to plan for the future. Neither of them have a personal life insurance policy. Henry is a smoker, so his policy will cost a little more than Julia’s. After the necessary medical questions are answered, their broker gets them a quote on a permanent policy that will cover them both for life.

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Life Insurance Tips from First Foundation

Financial Options With Life Insurance

Some life insurance policies, usually permanent life, allow you to take out a loan against the policy. Some also offer premium repayments after a set period of time. These options change from insurer to insurer, and from policy to policy. If you want a life insurance policy with financial benefits, let your broker know and they’ll find the right package for you.

Last updated Oct 29, 2018