Life Insurance 101: What You Should Know Before You Buy

A valid insurance policy is an important part of any long-term financial strategy. But what exactly is life insurance, and why do you need it?

What is Life Insurance?

The purpose of a life insurance policy is to protect the policy holder’s financial assets in the event of their death. The policy holder’s beneficiaries receive payments from the policy that help pay for obligations like mortgages, loans, and burial expenses. Additional funds from the payout can be used for living expenses for the policy holder’s surviving dependents.

The insured must pay a periodic premium to keep the policy active. Premiums are based on factors like age, gender, and health.

Some life insurance policies do not cover certain types of death, such as accidental or suicide. The experts at Keystone Insurance Agency, LLC in the Groveport, OH area can customize a policy that covers almost any circumstance that concerns you.

Types of Life Insurance Policies

  • Whole life policies use a portion of the premiums paid to fund a tax-free investment account. This account builds cash value that the insured can draw from while still alive, or can be used to increase beneficiary payouts.
  • Variable life policies start with lower premiums. Premium amounts rise as the insured ages. These policies can build cash value in the later years.
  • Term life policies have a premium payment schedule that does not change. The insured agrees to pay premiums for a certain length of time, or term. There is no cash value built, so the death benefit is a fixed amount.

Why You Need Life Insurance

  • The death of a family’s primary wage earner can leave dependents vulnerable. A life insurance policy means your family won’t have to downgrade their lifestyle.
  • Life insurance payments can be used to pay for funeral expenses.
  • Outstanding loans, final expenses, and medical payments can devastate grieving survivors. Insurance payouts can be used to settle otherwise overwhelming debts.

An insurance policy protects your loved ones when you can’t. The team at Keystone Insurance Agency, LLC is here to help residents in the Columbus or Groveport, OH area find life insurance policies to guard their families and financial assets.