How does Life Insurance Work?

To begin, life insurance, is exactly what it sounds like, it insures your life. In the event of your death, provided you pass away during the contract years of your life insurance policy, your beneficiary (typically your spouse or family) will receive the face value of your life insurance policy. That is the technical definition, but what does it really mean to you? Life Insurance helps your family survive financially after you are gone. That's the bottom line, an adequate life insurance policy will lessen the burden on your spouse and family when you pass away. Many people shy away from discussing life insurance because it makes them think of their own eminent demise, unfortunately this tends to be the societal norm.

The unfortunate part is not that people don't want to think about their own death, the unfortunate part is that they don't want to plan ahead to avoid headache and heartache of their family if something happened
. No we don't want to think about it either, but yes we do have life insurance on ourselves in order to lighten the financial burden if something were to happen to us. If something were to happen to you, no one and nothing can replace you. We don't believe that any sum of money will replace you and what you mean to your family. In fact, if you ask anyone that was helped out by a spouses life insurance policy, they would give it all back just to spend another minute with their spouse. That's not the point, the money is a tool that can help your family properly grieve and get through the tough times that will follow. Would you rather leave a financial burden for your family or help them out even after you are gone?

What types of life insurance are available?

Now that you know a little about why it's important to purchase life insurance for you and your family, lets talk a little about the different types of life insurance that are available. The two main types of life insurance that are vastly different are whole life/permanent life insurance and term life insurance. Whole life insurance does pretty much what it sounds like, it lasts your whole life and will pay out no matter when you pass away (provided your contract specifically states that, if you have a whole life policy that you would like us to review simply give us a call at 440.233.6199). Term life insurance only pays out if you pass away during the particular term of the life insurance contract. Typically term life insurance products use 10, 20, and 30 year term limits in their policy.

So what are the advantages and disadvantages of each? The biggest glaring advantage for term life insurance is that it is typically much less expensive rate wise than whole life insurance. So, if you are a younger person, it could be much more cost effective to purchase $250,000 worth of term life insurance than whole life insurance. The biggest downside of term insurance is that it will not pay out after a certain amount of time, but you will also not have to pay on the contract any longer either. The benefit of a whole life insurance policy is that it lasts your entire lifetime. The downside is that it is expensive and you might be able to get a better rate of return on your money if you invested wisely over the years than putting more money into your whole life insurance policy. With all of that being said, it truly all depends on your unique situation! There is no one size fits all when it comes to life insurance, which is why we help our clients tailor a custom plan to fit their wants and needs and we don't try to push certain products on them that they don't want or need!

The best advice we can give when it comes to life insurance is to ask questions and make sure that your plan fits your needs and you fully understand what it does and what you're paying for. We would love to help you in your life insurance planning process, you can contact us here online or you can pick up the phone and give us a call at 440.233.6199!

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NOTICE: This and all content is developed from sources believed to be providing accurate information. The information in this material is not intended to be used as tax or legal advice. Please consult with a tax and/or legal professional for detailed information regarding your individual situation. Some of this material was developed and shared by Cobos Insurance Center, Inc. to provide information that may be of interest. Cobos Insurance Center, Inc. is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
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