Life Insurance 101: What is Life Insurance?

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Life insurance sounds like a very serious and very expensive ordeal, and yet over 40 million people say that they need life insurance, but don’t have it. This is partly because a majority of interested parties tend to overestimate the cost of a life insurance policy, but the truth is: most people don’t know much about life insurance at all. This rather simple type of insurance can actually be explained quite concisely, and the local insurance experts at Weed Ross are here to do just that—welcome to Life Insurance 101.

Weed Ross specializes in pretty much every type of insurance that’s out there—but we don’t like to brag, we just like sharing our expertise. So when it comes to renters insurance versus landlord insurance, or why renters insurance is crucial to have as a renter, we have the answers. Below, we’re covering the basics and the need-to-knows about renters insurance, so you don’t have to look any deeper into these topics. Welcome to Renters Insurance 101.

In this article, we will cover:

What Exactly is Life Insurance?

Life insurance is a type of protective insurance policy that charges monthly premiums while you’re alive in order to provide a lump-sum payment to predetermined beneficiaries when you pass away. More simply put: life insurance is a legal contract that pays a sum of money to chosen friends or family. This payment is known as a death benefit, and as morbid as it sounds, it can be quite advantageous if utilized in the right way. The death benefit is paid out tax-free, and is designed to replace your income in the event of your passing. In this manner, life insurance allows for your desired beneficiaries to uphold their previous quality of life despite your death, enabling them to continue to afford housing, bills, groceries, clothes, and other essential expenses.

Are There Different Types of Life Insurance?

Life insurance, like many insurance policies, is not a one-size-fits-all package. Life insurance is typically split into two main categories: term life insurance and permanent life insurance. Term life insurance offers coverage plans for different increments of time, such as 10, 20, or 30 years, while permanent life insurance, as the name suggests, lasts for the remainder of the insured’s life.

  • Term Life Insurance: Designed to balance affordability and long-term financial value, term life insurance provides decreasing-term, renewable-term, and convertible-term options. These different terms allow policyholders to pay in increasing or decreasing amounts, or give the option to convert to a permanent life insurance plan along the way, respectively. 
  • Permanent Life Insurance: Typically slightly more expensive than term life insurance policies, permanent life insurance is commonly available in whole-life, universal-life, indexed-universal, or variable-universal plans These distinct life insurance plans allow the policyholder to do things like accumulate cash value, adjust the premiums, earn fixed rates of return, or invest in the cash value of the policy, respectively. 

What Are Some Considerations of Life Insurance?

Many people balk at the idea of life insurance for quite a while, and often don’t obtain a policy until late in the game, if at all. It’s important to do some research around the different types of life insurance policies that are available to you, given several factors. Things like your age, gender, health, family history, lifestyle, driving record, and other activities play a big role in how much life insurance you should buy, and when you should purchase. Talk with your local insurance guys here at Weed Ross if you’re stuck deliberating.

Life insurance does come with its fair share of benefits, however. Primarily, people take advantage of life insurance policies to make sure that their loved ones are taken care of, financially, in the event of their death. But also, the death benefit sum is tax-free, so life insurance offers a lawful method of minimizing your tax liability. This payment is commonly used to pay the estate taxes that might be due upon one’s passing. People who may consider life insurance include (but are not limited to):

  • Parents with minor children
  • Adults who own property together
  • Wealthy estate owners
  • Families who can’t afford funeral expenses
  • People with pre-existing conditions
  • Seniors who desire to leave money to adult children

What Does Life Insurance Normally Cost?

Life insurance policies vary depending on a wide range of factors, some of which we just discussed. But while many people believe that an average life insurance policy can cost upwards of $500 per year, the average life insurance rate is actually hovering closer to $160. Now, these numbers may, of course, fluctuate if you have a pre-existing condition, are a routine skydiver, enjoy swimming with sharks… you get the picture. Your health, financial history, and typical activities are key influencers to your life insurance monthly premium.

Still looking to learn more about life insurance? Interested in starting a policy with a reputable carrier? Contact the trusted agents at Weed Ross, or better yet, just stop by! We’re usually just around the corner.

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East Aurora, NY 14052


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