What is life insurance, anyway?
It’s the greatest gift you can give your family. Life insurance is more than a policy with a payout—it’s peace of mind, financial security for the future, and reassurance that the people you love most will be taken care of when you are no longer there to provide for them. Life insurance is highly customizable, and policies offer different benefits and coverage amounts to meet your unique needs.
Why do I need life insurance?
Getting clear about your motivation is an important part of finding the policy that’s right for you. Here are some of the most common reasons why people invest in life insurance.
I have a mortgage.
A home loan is a big responsibility. Even if multiple people contribute to the monthly payments, the loss of one individual could put the others (and any dependents) at risk of losing their home. Life insurance in the form of mortgage protection is essential coverage for yourself and anyone with financial interest in your home loan. People often take out separate life insurance policies in the amount of their mortgage, so other life insurance benefits can be used to support your family. Our mortgage protection calculator can help determine how much coverage you really need to protect your home.
I have a child, or one on the way.
It’s hard to think about not being there for your child, but life insurance is a guarantee that they will be financially secure in the event of your passing. It allows your spouse or the child’s caregiver to meet their needs and support them through adolescence; it can also cover education costs and enable them to pursue higher education. As any parent or parent-to-be knows, the greatest peace of mind comes from knowing your kids will be okay.
I have outstanding loans or debts.
Over the course of our lives, most of us accrue some debt, whether it’s student loans, credit cards, car loans, business loans, or personal loans. Unfortunately, these loans don’t disappear when we die, which means your next of kin become responsible for repayment. Life insurance removes this burden by settling your debts for you.
I want to make sure my family can continue to live their lifestyle.
Our income allows us to live a lifestyle we’re comfortable with. When multiple members of the household contribute to monthly expenses, we calculate our needs based on their combined income. If something were to happen to a contributing household member, life insurance ensures that our loved ones can continue living the life they’re accustomed to. This can help with anything from buying groceries and paying utility bills to creating an estate.
I care for someone with a disability.
People who care for loved ones with special needs often worry about what might happen when they’re no longer there. Life insurance can make sure that your loved one continues to receive safe, quality care, whether that means hiring a new caregiver, moving to an assisted living facility, or making alterations to a home to accommodate their needs. It can also provide for their long-term financial security, medical costs, and more.
I’m self-employed.
Most employer life insurance plans provide insufficient coverage (see below), but they do offer some protection while they’re active. But if you’re self-employed, you’re on your own to build a retirement and benefits package. By choosing your own life insurance policy, you can be sure you’re getting exactly what your family will need.
I own a business or have a business partner.
Life insurance for business owners or principals—also known as key person insurance—can play an important role in your business continuation plan. Whether your business is big, small, or somewhere in between, it pays to have a strategy for the future. In the event of a partner’s death, the key person policy can be used to compensate their surviving family for their loss of income or stake in the business, hire temporary help or plan a successor, and settle business loans.
I want to cover my final expenses.
Depending on your location and preferred arrangements, funeral, cremation, or burial costs can range from around $7,000 to $20,000 or more. Life insurance is an easy way to ensure that your loved ones will not face financial stress while they’re grieving.
What are the different types of life insurance?
Life insurance policies fall into two major categories: term and whole life. The one you choose will depend on your needs, goals, and financial situation.
Why should I get a separate life insurance policy? I have one at work.
Employers may offer life insurance through the company’s group plan. These policies usually provide a fixed amount of coverage based on your salary—and that amount is almost always insufficient to cover your family’s long-term needs. Furthermore, most employer-sponsored life insurance policies are not portable: If you retire or change jobs, you lose your coverage. Since most of us plan on surviving past our current job, it’s important to choose a policy that will remain active no matter where your career takes you. Also, if you pursue life insurance after retirement, it may be expensive or harder to obtain because of advanced age.
What do the policy types mean and which one is right for me?
Life insurance is broken into two major categories, term and whole life.
Term life insurance is simple coverage that offers a straightforward payout and expires after a set period of time (or term) such as 15, 20 or 30 years. Term life insurance is the most affordable option and often provides you the flexibility to convert to a more permanent option (whole life) when the time is right.
There are many reasons why you would get a term life insurance policy, read more on that above in our “life insurance 101” section.
You will see different insurance companies brand their products with proprietary names such as level, vantage or protection term policy.
This is then followed by the number of policy years you are quoting. Depending on the carrier, each company names their policies differently.
We only work with top rated carriers, however, you can see the insurance company’s credit rating (which indicates their financial strength and stability)
right alongside the coverage amount and term length.
Term policies could come with rider options as well. A rider is an additional life insurance benefit that generally requires additional premium.
The addition of riders allows your policy to be customized to your specific needs. Common term life riders are:
Waiver of Premium Rider which provides an additional layer of protection that waives your policy’s premium if you become totally disabled (as defined in the rider)
so your policy will not lapse.
Accelerated Death Benefit Rider (which often is included at no additional cost). This protects you if you become terminally ill by allowing you to receive an advance of
the policy’s death benefit.
After you apply and submit your application, feel free to contact one of Surevested’s experts to discuss rider options or let us know you are interested in adding one.
When it comes to permanent life insurance policy options, there is a bit more complexity because they can offer benefits far beyond a simple payout. Read more about what
a whole life policy is above.
When comparing permanent life insurance options you will see policies such as Whole Life, Universal life (UL), or Indexed Universal Life (IUL and IUL2).
Whole and universal life policies are typically made up of two components: an insurance portion and an investment/savings portion, so you will find information within the
quote pertaining to both.
Whole life policies are the most stable with guaranteed cash value amounts and fixed premiums. These policies will last, you guessed it, for your whole life. As long as premiums
are paid, your beneficiary will receive the death benefit amount upon your passing. In terms of the savings portion of this policy, the company you choose will take a portion of
your premium payments and put them into an investment or high interest account.
These accumulated funds are called cash value and over time they accrue on a tax-deferred basis.
The cash value of your whole life policy gives you the option to borrow against it, like a loan, in case you need funds in an emergency. Also, if you choose to surrender your policy
for whatever reason, you will receive your accumulated cash value back less any surrender charges.
On some whole life policies, you could also be offered something called a dividend. This is the portion of the insurance company’s profits that are paid to the policy holder,
generally on a yearly basis. This is common among mutual insurance companies rather than publicly traded insurance companies. When you’re on the quote page, if the policy you
are quoting offers a dividend, you can see it’s historical rate of return.
Universal life or Indexed Universal Life are a bit more complex because they combine some of the features of both term and whole life and their options are variable and adjustable.
Universal Life (UL) gives you the option to increase or decrease your death benefit over time and pay premiums on a less predictable basis. This means you can change how much coverage
you have if your needs change. Additionally, Universal life policies can allow you to pay premiums over time using the money that has accumulated in your cash value. In a nutshell,
UL policies offer some of the guarantees of a whole life policy with the flexibility of coverage change.
An Indexed Universal Life (IUL) policy offers the same benefits as a UL policy except your cash value is tied to various well known indexes such as the S&P500 (not to be confused with
investing money directly into the stock market). These policies are a bit riskier as interest based performance is not guaranteed.
Although many companies offer the same types of policies, each company names their policies differently. We only work with top rated carriers and you can see the insurance company’s
credit rating (which indicates their financial strength and stability) right alongside the coverage amount and term length in all the quotes we provide.
In order to better understand the savings portion of whole, UL and IUL life policies, you will be able to compare on the quote page how the savings portion of these policies performs
compared to other investments like a savings account, a treasury bond and more.
If you click on the advanced analytics portion of the quote you can see graphs on the carriers risk and
volatility compared to the market, the risk adjusted return and how your premium contributions would compare on a term vs. whole life option.
All life insurance quotes come in a full illustration form. These documents are comprehensive overviews of the policy values broken down year to year, possible rider options and
information regarding it’s possible performance. If you are interested in your quote’s illustration, simply click on the “View Illustration” button. This can be downloaded and printed
if you would like to review it more thoroughly.
