What is life insurance?

What is life insurance and what is it for?Who needs insurance?And why is life insurance important?

I believe everyone has heard of the term "life insurance".But if you are invited to tell others about life insurance, can you do it?What if you need to describe different insurance clauses, regulations or types?What is the use of life insurance?How long is it guaranteed?Who needs it?This may seem complicated, but the answer is quite simple.

The initial role of life insurance is to provide your loved ones with a tax-free sum of money when you die so that they can continue to achieve their financial goals.This is a valuable asset that allows you to sit back and relax. Even if you are not with the beneficiary, they can be taken care of.

Up to now, the lifetime cash value life insurance policy in the United States has evolved into a complex professional comprehensive financial product to meet the needs of diseases, taxation, inheritance, wealth and other aspects.

In the American Life Insurance Guide, you will learn:

• What is life insurance
• How life insurance works
• Advantages of life insurance
• Why life insurance is important

What is life insurance?

Life insurance is a contract between the policyholder and the insurer (company) or the insurer. The insurer (company) promises to pay a specified beneficiary after the death of the insured (usually the policyholder) money.According to the contract, other events such as terminal illness, major illness, injury or major illness may also trigger payment.

A life insurance policy is a legal contract, and the terms of the contract describe the limits of insurance events.Specific exceptions are usually written into the contract to limit the liability of the insurance company; common examples are suicide, fraud, war, riots and related claims.

How does life insurance work?

Once you understand the legal meaning of life insurance, life insurance is easier to understand.In the next step, we will learn how to understand the common components of an insurance policy, how to apply, and the different types of insurance policies and related costs.By studying this knowledge, you will understand how to obtain the right insurance for your family according to your needs.

What are the common characteristics of life insurance?

No matter what type of policy you purchase, life insurance includes the following 5 parts:

Insured / Insured Individuals insured by life insurance companies.

Policyholder The person or organization who owns the life insurance policy.Normally, if the insured person dies, a death benefit is paid.Usually, the insured and the policy holder are the same person.

Beneficiary/Beneficiary  The person or organization receiving the payment.More than one beneficiary can be designated.

Premium/Premium  A monthly or yearly payment to keep the policy valid.If you stop paying premiums, the policy will lapse.

Death benefit  Commonly known as the amount of insurance, death compensation.It is the total amount of the upper limit paid when the compensation condition is triggered.Once you pay the first premium, the life insurance policy becomes effective, which means that once the policy becomes effective, you are eligible for death benefit.

The insurance company has no obligation to pay death compensation under the following special circumstances:

• • The policyholder’s term life insurance policy has expired
  • The policy lapses or is cancelled
  • The death occurred within two years after the policy took effect, and the insurance company found evidence of fraud in the application

How to apply for life insurance?

Life insurance application usually takes 3 to 8 weeks from start to finish.But you usually only need 7 steps to complete the whole process.The following is the application process:

1. Get free plans and quotes.By comparing the scheme designs and rates of different insurance companies, it is possible to ensure that the required insurance policy design scheme is obtained.You do not have to pay for life insurance quotes.

2. Choose your insurance policy.Consider your goals, costs, customer service and average application time.

3. Fill out the application form.You can fill out the application form online or authorize an expert for help.Either way, you need to answer some basic income and health information.

4. Participate in a physical examination.As part of the underwriting process, you may need to take a medical exam similar to a basic medical exam.The examination is free, and the medical examiner will come to your home or your designated place according to your schedule.After 2020, with the development of technology and big data technology, many insurances provideInsurance process without medical examination, For healthy policyholders aged 18-50, the insurance can be completed within 5 days at the earliest.

5. Complete the interview.The insurance broker will ask you some lifestyle and health questions.

6. Waiting for approval.The insurance company will collect all the information to determine the final premium, which should be similar to the quote you received.

7. Sign your policy.After you sign the policy and pay the first premium, your policy will take effect.

For more information, please understand exactly what you need to do when applying for life insurance.

What are the different types of life insurance?

"Life insurance" is just a general term. When it comes to insurance products, there are many types of products.How long the policy lasts, insurance costs and additional deductions all depend on the different insurance coverage agreed for each product.But broadly speaking, we divide life insurance into two different types: term life insurance and whole life insurance.The following figure shows the history of the development of life insurance product functions:

Term Life Insurance/Term

Term life insurance is valid for a certain number of years, which is called term (Term).When the period ends, the policy is declared to expire.This is usually the most affordable type of life insurance and is used to provide death compensation for the beneficiary for the number of years you need it.

Learn more about term life insurance.

Life Insurance/Permanent

Whole life insurance has no expiration date. As long as the policyholder pays the premium, the policy will continue to be valid.There is also a cash value part of whole life life insurance, as an investment tool that can be used.Compared with term life insurance, the function of cash value accumulation partially increases the price of whole life insurance.

Whole life insurance products include:

1. Participating Life Insurance/Whole Life
2. Universal Life
3. Investment universal insurance VUL/Variable Universal Life
4. GUL/Guaranteed Universal Life
5. Indexed Universal Life IUL/Indexed Universal Life

Learn more about the product classification, advantages and disadvantages of American Life Insurance.

Comparison of term life insurance and whole life insurance

Term life insurance or whole life insurance?I believe that most users who are new to American life insurance will ask themselves this question.For most people, term life insurance is a good choice because it is reasonably priced and simple.However, for customers with more complicated financial status, whole life insurance with cash value reserve function and permanent protection is very useful.Seeking a licensed professional broker or financial expert can help you determine which option is more suitable for your needs.

How much does life insurance cost?

According to the statistics of the LIMRA American Life Insurance Market and Research Association Industry Association, for a 20-year-old non-smoker, the estimated cost of term life insurance with an insured amount of $250,000 is approximately $160 per year.The actual cost of life insurance depends on many factors, including where you live, your age, your health and health history, your financial history and your hobbies.Of course, the number of policies covered, the type of protection and the length of the protection period will also affect the rate.

Different insurance companies weigh these factors in different ways, which is why it is important to compare quotes from multiple companies to ensure you get the most affordable plan.

What are the advantages of life insurance?

Life insurance has many advantages that make it an essential part of financial planning.If you take life insurance as part of a family protection plan, you have the following significant advantages.

Tax-free funding

The death benefit provided by the life insurance policy is a tax-free sum.This means that the entire amount will be donated in full to your beneficiaries.

This is an affordable protection plan for everyone

Although the exact cost of life insurance varies, to a large extent, it is quite affordable.Consider this: a healthy 30-year-old man may be able to buy a whole life insurance policy with a sum assured of US$40 for only US$100,000 a month.This expense is only about the monthly mobile phone communication cost, or the cost of a meal.Since the accumulation of a meal can help pay for college expenses, housing loans, retirement plans, and even major injuries and illness expenses, then the money is very worthwhile.

This is another investment tool

Term life insurance is very simple, but whole life insurance products with cash value function can be used as a mandatory investment tool (as opposed to mandatory savings).Before investing or choosing whether the whole life insurance policy is correct, you should consult a financial adviser. If you already have other tax-free investment options (such as ROTH IRA, government bonds), then life insurance products can be used as another additional investment and financial management tool for you .

Why is life insurance important?

It is important to have a good family or personal financial plan, but if you are the main source of income for the family and you pass away, all the plans are meaningless.The significance and importance of life insurance lies in the confidence in life it provides:

• Provide future protection plans for your family, such as college tuition plans and tax-free lifetime income plans after retirement
• Repaying a home loan or student loan
• Leave an estate and succession plan for children, grandchildren or society
• Pay for the funeral and other expenses at the end of life. According to statistics, the average cost is nearly $10,000

For more information, please accurately understand the purpose and function of life insurance.

Who needs life insurance?

Life insurance is a useful tool for most people, but this does not mean that everyone needs it.The following may be exceptions:

• You have no beneficiaries.If you are young and single, and no one lives on your finances, you may not need life insurance.But remember, you still have a reason to buy it.As time goes by, the later you buy, the more expensive life insurance premiums will be, so you might choose to apply when the cost is lowest when you are young.Although there are no beneficiaries, you may want to give back to the community and society and leave the money to some organizations or charities.
• You have no (or expected) any debts.If your death will not bring debts to your family or relatives or friends, you may not need life insurance.But you should also consider future debts, such as the cost of taking your children to school or taking care of elderly parents.It is important to look ahead to the expected demand for your life insurance, not just assess the past.
• You can insure yourself.Even if you do have or expect debt, you can use your savings to fully pay it off.

If you are not in one of these scenarios, you should seriously consider life insurance.If you don't have it, you may in the worst case, let your loved ones suffer financial harm-these can be easily avoided through life insurance.