The Basics of Life Insurance

A life insurance policy provides a contractual agreement between the insurance company and the policyholder that provides a lump sum payment to the beneficiary of the policy when the policyholder dies as long as the policyholder pays the premiums in a timely manner. 

Safechoice Insurance Agency serving Rochester MN wants you to understand that not all life insurance works the same. You can find two main types of life insurance. These include:

• Term life: a policy that remains in force for a specific number of years.
• Permanent life: a policy that remains in force as long as the insured pays the premiums, surrenders the policy, or dies.

Within those two main types, you will find much variety. Term policies may charge premiums at a level term. That means the premiums remain the same annually or at an increasing term which charges lower premiums at a younger age, but which increase as the individual ages.

Permanent policies provide a much wider diversity. A single premium policy charges only one up-front premium, a balloon payment that funds the policy for life. A whole policy can accumulate cash value, while a universal life policy amasses an interest-earning cash value that charges premiums similar to term life insurance. It allows the death benefit and premiums to get adjusted over time. A variable universal policy amasses a cash value that the policyholder can choose to invest. An indexed universal policy lets the policyholder amass a cash value account and earn interest or invest the money according to an equity-indexed rate of return or a fixed rate.

Some perm policies do not amass cash value. The guaranteed universal policy type does not and charges lower premiums than a whole life policy. A person with a pre-existing medical condition can obtain a guaranteed issue policy to provide a death benefit to their beneficiary. In the first two years of issuance, the policy only pays for accidental death. After that period, death from any cause except self-infliction receives coverage. A burial or final expense policy provides a small death benefit, typically enough to cover a funeral or cremation.

Contact Safechoice Insurance Agency serving Rochester, MN to learn more about life insurance and determine which policy works best for you.