You probably know that insurance is a way to manage risk against unexpected financial losses. Whether it’s home, auto or health, chances are you have at least one insurance policy. But do you have a life insurance policy?
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What is Life Insurance?
Simply put, life insurance is a contract between a policyowner and an insurer. The policyowner pays premiums to the insurer. In exchange, if the policyowner passes away while the policy is active, the insurer pays a sum of money to whomever the policyowner has chosen as their beneficiary.
Why is Life Insurance Important?
Insuring one’s life may seem like a strange concept, but if you have people who rely on you financially, life insurance is an important financial tool. The top reasons Americans own life insurance are:1
- Paying for burial costs and final expenses—the average funeral is costly, running about $8,000–$10,000.2
- Transferring wealth across generations—leaving a financial legacy can benefit a family for generations to come.
- Replacing lost wages or income—four in 10 families say they would face financial hardship within six months if the primary wage earner died.3
- Supplementing retirement income—life insurance can help provide a comfortable retirement for a spouse, partner or loved one.
When a person owns life insurance, they can have peace of mind knowing their family’s future is financially protected if the unexpected happens.
How Much Does Life Insurance Cost?
Life insurance premiums are typically paid monthly, quarterly or annually. Premium rates are determined by several factors, including the policy type, age, gender and health history at time of application. Typically, the younger a person is, the lower their premiums will be.
What are the Different Types of Life Insurance?
We mentioned above that premium amounts are partly determined by the type of policy. There are two main types life insurance: term and permanent.
- Term life insurance pays a death benefit if the insured person does during a specified period. A term policy’s specified period may be 15, 20 or 30 years, or to-age-65. The premium is level, which means it remains the same for the entire period chosen.
- Permanent life insurance is coverage that can be kept for a lifetime. This means no matter what age the insured is when they pass away, their beneficiary will receive the death benefit. For this reason, permanent life insurance tends to be more expensive than term. Permanent policies are known for building cash value, too, which an insured can withdraw or borrow from as needed.
Do You Need Life Insurance?
Whether you’re elderly or young, single or in a relationship, working or staying home, financially stable or looking to improve financial security, people in all stages of life should consider life insurance. Even if you already have a life insurance policy provided by your employer, you may still need an and individual policy. That’s because workplace policies often provide basic minimum coverage, and you probably can’t keep your coverage if you change jobs or retire.
How Do You Get Life Insurance?
Buying life insurance is a simple transaction. Some people work with an agent or broker to get coverage, while others prefer to buy life insurance directly from an insurance company.
Can I Get Life Insurance Without a Medical Exam?
Yes, you can get life insurance without a medical exam. Learn how to qualify for Colonial Penn’s Guaranteed Acceptance Whole Life insurance with no medical exam.
Colonial Penn is here for you!
Colonial Penn has specialized in making life insurance simple and accessible by offering it directly to consumers since 1957. Click here to learn more.
1LIMRA, Facts About Life 2020, September 2020.
2Parting, How Much Does the Average Funeral Cost?, https://www.parting.com/blog/how-much-does-the-average-funeral-cost/, January 2021.
3LIMRA, Life insurance Awareness Month (2022), https://www.limra.com/en/newsroom/liam/, 2022.
