Getting life insurance coverage with a well-established and financially secure company is key. Our reviews cover a range of insurers that offer different policies with customizable features to help you find the best insurer and policy for your needs.
The cost of life insurance depends on a number of factors, including age, health, gender, the amount of death benefit, and the type of policy. We found that, on average, a healthy 35-year-old will pay $23 per month for a $500,000 policy with a 20-year term. However, a permanent life insurance policy for the same individual with the same death benefit could cost over $500 per month.
Term life insurance offers you a death benefit for a specified term, such as five to 30 years, and provides no benefit if you outlive that term. Permanent life insurance is designed to pay out no matter when you die, even if you live to a ripe old age. For this reason, it's more expensive than term coverage and has some extra features, such as cash value, that term coverage does not.
There are different ways to estimate how much life insurance you need. One approach is to purchase a policy with a death benefit equal to 10 times your salary. Another is called the DIME formula—it accounts for your debts, income, mortgage, and education needs for dependents. There are other approaches as well that consider your circumstances in greater detail.
In general, life insurance can provide either permanent or temporary coverage. Permanent life insurance is designed to last into your old age, while temporary coverage ("term" life insurance) only lasts a specified number of years, such as 30. Common types of permanent life insurance include traditional whole life policies, universal life insurance, and variable life insurance.
Both types are designed to provide lifelong coverage and often have a surrender period during the early years of the policy. However, cash values in a whole life policy are guaranteed, while universal life cash values can fluctuate based on current interest rates. You also may be able to adjust the death benefit on a universal life policy and skip premium payments with sufficient cash value.
Underwriting is the process a life insurance company uses to evaluate the risk they undertake by providing a life insurance policy on an insured. It's based on the insured person's health, age, gender, employment, hobbies, family history, credit, and other factors. Via the underwriting process, the insurer decides whether to approve someone's application for insurance and at what premium.
If you made the wrong life insurance purchase, you have options. For example, you may be able to amend your current policy to better meet your needs or cancel during the free look period with a full refund of any premium you paid. Whether you replace it with a new policy will depend on the type you purchased, its surrender period, and your needs.
The "free look" period gives purchasers of life insurance and annuities a set time period to walk away from the transaction penalty-free, with no reason required. Each state sets the period.
A life insurance policy’s face value is typically the amount of death benefit it will pay when the insured dies. Some permanent policies may pay more or less than this amount, depending, for example, on any loans made against the cash value or paid-up additions of life insurance.
Insurable interest is when you (or a group) have an economic interest in another person’s life or the continuance of a legal entity or asset. It also exists when you have an interest in another person based on love and affection, providing there is a blood or legal relationship involved.
The person whose life is insured by the policy: If they die while the policy is in force, the beneficiaries receive the death benefit.
The person who owns the life insurance policy is often the person insured, but not always; also referred to as the policy owner.
The person (beneficiary) or persons (beneficiaries) who receive the death benefit when the insured person dies.
The amount the beneficiary or beneficiaries receive from a life insurance policy when the person insured dies.
Cash value is the amount of money inside a permanent life insurance policy. It is the accumulation of funds that remains after your premiums pay for policy expenses. The cash value can help offset insurance costs as it increases over time, and may be accessible via loans and withdrawals.
An accelerated death benefit (ADB)—also referred to as a living benefit—is a feature of a life insurance policy that pays a percentage of the death benefit early (up to the full benefit in some cases) if qualifying conditions are met.
The cash surrender value of your policy depends on how much cash value you have and what if any surrender penalty exists when you want to cancel it. How long the surrender period lasts and how surrender charges are calculated are listed in your policy.
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