life insurance

FAQs About Life Insurance: Answers to Top Questions

September 6, 2023

Life policies are an important tool for long-term financial planning and ensuring peace of mind. Despite the value of life insurance, many people misunderstand the fundamentals of the coverage or its importance. There are some key facts that everyone should understand about these policies.

How Does Life Insurance Work?

At its core, life insurance coverage is a contract between the policyholder and an insurance company. In exchange for regular premium payments, the insurance company provides a death benefit to your beneficiaries upon your passing.

Why Do I Need Life Insurance?

There are several common reasons people seek life coverage. The death benefit can replace your income when you're no longer there to provide for your loved ones. It also helps your family pay off any outstanding debts, including your mortgage, student loans, and credit cards. Not only that, but life policies provide coverage for end-of-life and funeral costs. 

How Much Does Life Insurance Cost?

The cost of life coverage varies depending on several factors, including your age, health, coverage amount, and the type of policy. Many people overestimate the cost, assuming it's unaffordable. In fact, a recent study by LIMRA found that more than half of Americans estimate the cost of life coverage at more than three times higher than it is. Some online premium calculators can help you estimate your costs.

It's important to remember that life insurance is more affordable when you're younger and in good health. Waiting to purchase a policy can result in higher premiums. Therefore, it's often a wise financial decision to secure coverage sooner rather than later.

What Are the Different Types of Life Insurance?

There are various types of life policies, but the two primary categories are term life insurance and whole life insurance. 

Term life insurance covers you for a specific term, often 10, 20, or 30 years, providing a death benefit if you pass away during that term. Term life coverage is an affordable solution for meeting specific coverage needs. For example, you might choose this policy to cover your family until your children are financially independent or until you pay off your mortgage. Unfortunately, these policies build no cash value and become more expensive as you age.

Whole life coverage covers you for your entire life, providing lifelong protection. Whole life coverage builds cash value as well, making it a great source for accumulating dollars for education, retirement, or other opportunities that arise.  over time. Most whole life policies come with higher premiums compared to a term life option.

The choice between term and whole life depends on your financial goals, family's needs, and budget. For many, a combination of both types can provide comprehensive coverage.

How Much Life Insurance Do I Need?

Determining the right amount of life coverage can be challenging, but it's crucial for ensuring your loved ones are adequately protected. To estimate the appropriate coverage amount, consider factors like your current income, outstanding debts, future expenses, and your family's standard of living. Online calculators and consultations with insurance professionals can help you make an informed decision.

Understanding how life insurance coverage works, why it's essential, its cost, the types available, and how to calculate your coverage needs makes it easier to get the protection you need. Learn more and begin tailoring coverage for your needs by reaching out to us at 1891 Financial Life.


About 1891 Financial Life 

At 1891 Financial Life, we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help us to continue the good works that we do in the community. 

Our mission is to provide products and benefits that assist individuals and their families in achieving financial security while helping to build strong communities by supporting volunteer programs that reflect common shared values. In 2023, 1891 Financial Life was  listed by Forbes as one of "The World's Best Life Insurance Companies."