How Life Insurance Works
Life insurance is an important component of any financial plan. According to the CDC, about 200,955 people lost their lives in 2020 due to unintentional injuries. This mortality rate includes different kinds of unintentional deaths.
If you have dependents, you only want the best for them. If an accident takes your life, your loved ones will need financial compensation to protect them when you are gone. That is the main reason why about half of the American population owns life insurance.
Safe Wealth understands how everyone faces unique challenges. Regardless of your situation, we believe that you deserve financial security for your loved ones. As such, we offer various life insurance policies. Connect with us to determine the best one for you.
What Is a Life Insurance Policy?
Life insurance is a contract. Think of how you would buy insurance for your property or car. If you encounter property damage or survive a car accident, your insurance policy will pay for the damages.
With a life insurance policy, you have financial protection in case of death. Your dependents will receive death benefits when you lose your life. This way, the loved ones and beneficiaries you helped will remain financially secure.
The terms of a functional life insurance policy change based on the specifics of your living situation. Let Safe Wealth’s experts figure out which option is best for you by requesting a quote today.
How It Works: Components of a Life Insurance Policy
Here’s a quick overview of everything and everyone involved in life insurance:
- Insurer: Your insurance provider is the life insurance company that you’re getting a policy from. Reliable insurance providers will ensure that you have a policy that covers everything your dependents may need while keeping it within your budget.
- Policyholder: Whoever owns the life insurance policy is the policyholder.
- Insured: Meanwhile, whoever benefits from the life insurance policy is the insured. The insured can be policyholders themselves or another person.
- Policy Length: Insurance policies have a set lifespan. This determines how long you will pay insurance premiums to keep the death benefits of a life insurance policy alive.
- Insurance Premium: These are the payments that policyholders make to keep their life insurance policy active. Depending on the policy you purchased, you could pay premiums monthly or yearly.
- Death Benefit: This component is the amount of money that your insurer will grant in case of the insured’s death, either upon the event or after a certain time. Your insurance provider will pay death benefits to the insured’s beneficiaries — either their surviving kin or charitable organizations they supported while living.
Beneficiaries can use the money from death benefits to help them deal with their grief during a hard time. Allow our insurers to financially protect your loved ones in case you die with a life insurance policy. Call us today for a quote.
How Much Does Life Insurance Cost?
There is no standard price tag for a life insurance policy. Everyone has different circumstances and financial situations that affect the need for financial protection. For instance, if you have life-threatening medical conditions, you face a higher risk of losing your life. That risk may affect the rates you will pay for life insurance.
Your income and occupation would also factor into your final price. After all, your life insurance is a safety net that should not affect your daily living expenses. You need a policy that comes at an adjustable price. At Safe Wealth, we can customize a life insurance policy that fits any budget while meeting your need for financial protection. Get a quote today!
What Factors Affect Life Insurance Costs and Premiums?
When you apply for life insurance, the insurance company will usually look at the following things before coming up with the best price:
- Age: An applicant’s age is usually the primary factor for determining a price. Insurers associate an applicant’s age with life expectancy. Accordingly, it involves their ability to maintain payments and affects the company’s risk in granting a policy.
- Gender: Insurers will look at gender-based statistics in determining the price of your life insurance policy. For example, women statistically live longer than men. You could pay a lower price as a woman than a male counterpart despite being the same age.
- Medical Records: You may have to undergo medical screenings to confirm your health status as it will affect your total price. Specific medical conditions indicate risk, whether the tests find it in you or from an immediate family member.
- Lifestyle Activities: Other risk factors include how you live, like if you are a heavy smoker or hike often. These dangerous lifestyles may increase premiums because of the risks of shortening your lifespan or losing your life from an accident.
- Driving History: You can expect to pay fewer premiums if you have a clean driver’s record. Insurers may look at individuals who have previously violated traffic laws as riskier applicants, increasing risk-based premiums.
How Do I Know If I Need Life Insurance?
Generally, you need life insurance if you financially support anyone. Here are some questions you can ask yourself to see if you can maximize the benefits of life insurance.
Are You a Parent Supporting Dependent Children?
Children who depend on their parents for food, shelter, and finances are at risk of losing resources if they die unexpectedly. Whether your children are minors or adults with special needs, losing their primary support system puts them in financial hardship. Protect your children with a life insurance policy that ensures they still have financial support when you pass away.
Do You Have Joint Property With Someone?
If you are making loan payments or paying taxes on a property with someone else, like a spouse, then your death may leave them incapable of continuing the financial responsibilities you signed up for together. Your life insurance policy can protect your partner from the possibility of losing the joint mortgage payments you started.
Are You an Elder With Adult Children Taking Care of You?
Whether you are a parent or a grandparent to an adult who’s taking care of you financially or otherwise, your life insurance policy can help repay your efforts when you pass away. Essentially, you are leaving a financial plan for whoever provided you with the necessary elderly care.
Do You Run a Business With Employees Who Depend on You?
If you are a key executive of a company, your death may cause problems for the entire firm. Whether you are a CEO or a COO, the company can determine that your role is essential to its growth and stability. They can purchase a life insurance policy for you to ensure its continued success.
Are You Planning To Have Dependents in the Future?
Even if you are an adult without any dependents right now, you can get the most out of your life insurance. People who are younger and healthier tend to get lower rates than people who are older and have more health risks. Buying a life insurance policy early can lock in your future dependents’ financial stability.
What Are the Benefits of Life Insurance?
Having a life insurance policy offers several benefits, such as:
- Funeral Expenses: An insured’s dependents may not always have the financial resources to cover funeral and burial costs. These prices also keep going up, so it’s important to protect anyone who depends on you financially from the costs of an accidental death.
- Lost Wages: Life insurance policies can make up for a person’s lost wages. Similarly, it can put a price on a person’s time at home if they were a stay-at-home spouse who depended on their loved one’s income.
- Pay Off Debts: With the right type of policy, your life insurance can cover any debt you accrued while living. Relevant institutions will collect the money from your insurer, which will ensure that your policy accounts for all debts that need paying off.
- Fund College Tuition: Certain life insurance policies can serve as plans to pay for college tuition. This benefit is especially useful if you pass away before your children reach tertiary education age since you already have a plan for them.
- Cover Elder Care Expenses: People with life insurance can still utilize their policy to after a set term. Instead, they last as long as you maintain your premium payments. These policies can also double as a savings account where you can cash out for your financial needs. Different kinds of permanent life insurance policies include:
- Whole Life Insurance: These policies are usually what you get when you look for permanent policies. They remain effective as long as you pay premiums. Part of the premiums you have carry a cash value, which will grow as long as you keep the policy alive.
- Universal Life Insurance: These permanent life policies give you adjustable premiums and access to the cash value. If you withdraw money from your policy’s cash value, your policy’s charges may adjust accordingly.
- Variable Universal Life Insurance: This type of permanent life insurance policy is both a cash value account and a savings account. As the policyholder, you can control how to use your cash value.
How Do I Choose a Life Insurance Policy?
Every policy offers something unique for a specific individual. For example, if you are the main provider for your family, you can use term insurance until your children are old enough to take care of themselves. On the other hand, if you want to leave an inheritance, you should get a permanent life insurance policy.
Choosing the right life insurance policy requires comprehensive planning and an assessment of your current situation and goals. Consider getting help from our experts to find the best one. Our team can explain the advantages you would have when getting one policy over the other. Simply get in touch for a quote.
Keep Your Wealth Safe With Safe Wealth
Financial security is a major concern for anyone with dependents. We are here to help you lock in that safety for your loved ones with a customized life insurance policy to ensure they have everything they need if tragedy strikes.
At Safe Wealth, we carefully assess our clients’ situations to determine how much coverage makes sense for them. We also look at their budget to make sure that it won’t cost too much to keep up.
Because we never know what will happen tomorrow, our team believes that everyone deserves the peace of mind that comes with having a financial safety net.
Get Started: Let Us Customize Your Life Insurance Policy
There is no better time than now to get life insurance. As your family’s primary supporter, your life is valuable, and we intend to maximize that value for your loved ones in case something happens to you. Understand your options by speaking with a Safe Wealth Agent today!