Life Insurance Common Terms:
- Life Insurance is to protect the people who depend on you and would suffer a financial loss when you die
- A beneficiary is the person or legal entity, such as a charity, designated to receive the death benefit
- The death benefit is the sum paid to the beneficiary by the insurance company
Life insurance pays a pre-determined amount of money to your beneficiaries in the event of your death. You are able to pick your pre-determined amount and also who your beneficiaries will be. You will have to pay a monthly premium for your life insurance plan until you pass away.
How much life insurance should a person have?
The Rule of thumb is 10 times your annual income. But you have to consider the following factors:
- Number of dependents
- Ages and needs of dependents
- Mortgage and/or rent payments
- Loan balances
- Health insurance
- Children’s college tuition
- Basic necessities
Some life insurance companies require a physical for people over a certain age. Some companies don’t require physicals.
There are also different amounts you can be covered for. You need to take into consideration how much debt you have and how many loved ones you would like to have as your beneficiaries. You want enough life insurance coverage to pay off your debts, cover your funeral costs, and still leave some money for your loved ones to use toward other expenses.
Where do you buy life insurance?
- Some employers offer it as a benefit
- Insurance companies sell insurance through experienced agents
- Online life insurance companies
Make sure to shop around for quotes on life insurance. Premiums can vary and you will have to fit your monthly premium payments into your budget.