Life insurance explained (in words you can actually understand).

Life insurance is a promise to your loved ones that they will be taken care of in the event of your death.
The fine print reads like this. Life insurance is a contract between you and an insurance company. The insurer agrees to a pay a designated beneficiary (the loved one(s) of your choosing) a sum of money (the “death benefit”) if you die. Your obligation is to pay the agreed upon premiums to keep your policy in good standing.

Most of us live our lives as though we will never die. We also never plan to cause a car accident, never intend to accidentally flood every floor of the house while we’re relaxing on a beach, and for sure, never get sick.

But we still own life insurance. Still own auto insurance, homeowner’s insurance, and health insurance. Why? Because you can do everything right and still have a really bad day. You can drive safely and still be in a car accident. You can watch helplessly as mother nature deposits a tree on your garage. No matter how strong you are, you can still get sick. And yes, while you can plan to live forever, there is a very small possibility that you could die tomorrow. Buzzkill.

So do YOU need life insurance? People without a car don’t need car insurance, no home, no homeowner’s insurance. But life insurance is a bit different – it has its own purpose, and its focus is on people that depend on you financially.

You need life insurance if…

• You are a parent that wants to be certain your children are provided for and their college expenses will be covered.
• You want the peace of mind in knowing your spouse will be supported financially if something happens to you.
• You do not want to burden your loved ones with end-of-life expenses such as burial costs or estate taxes.
• You have debts that you do not want to pass on.
• You have a family business that you want to protect.

Not all life insurance is created equal…

Don’t know about you, but we like to keep things simple. When it comes to life insurance, the simple choice is term life insurance. Term life insurance provides coverage at a fixed annual cost for a set number of years.

If you were to stop paying your premiums in the future, your coverage would disappear (“lapse” in insurance speak). But remember, you can’t just decide to take a year off of having life insurance then resume again at the same price. Reapplying as an older applicant, with possibly more health issues, can result in higher premiums. Think of it like auto insurance in reverse, the more mileage you have, the higher the cost of insurance.

Generally people like the simple choice, so it’s no surprise that almost 70% of the life insurance coverage issued is term insurance.