What is Life Insurance?

If you’re new to buying life insurance, it’s important to learn how it works and what coverage works best for you. To start, a life insurance policy is a contract with an insurance company to exchange premium payments for death benefit protection.  

Life insurance is chosen based on the needs and long-term goals of the owner. There are many different types of life insurance. Term life insurance provides protection for a previously selected period of time such as 10 or 15 years. In exchange for your premium payments, the insurance carrier will pay death benefit to your beneficiaries if you pass during the term of the contract. Permanent life Insurance, on the other hand, provides life insurance coverage that does not expire. With options in between, it’s good to know that there is a plan that works for your lifestyle. It's important to note that death benefits from all types of life insurance are generally income tax-free.

cut out of family with house

Benefits of Life Insurance 

You might understand the primary benefits of purchasing life insurance. For example, if an unexpected death occurs, the family would get the reassurance of knowing they will have the financial and proper resources to carry on. 

In general, most types of life insurance work to ensure that your family will have their finances stable in your absence. It is important to note that the more coverage your life insurance has, the more benefits your family will have when needed. With a smaller amount of coverage, your plan could only cover funeral expenses. With a larger amount, your family can: 

  • Have income replacement for years of lost salary
  • Pay off your home mortgage
  • Pay off other debts, such as car loans, credit cards, and student loans
  • Provide funds for your kids’ college education
  • Help with other obligations, such as caring for aging parents

Aside from your coverage amount, there are legal implications that can benefit you as well. This includes the tax advantages of life insurance as death benefit payouts are assumed tax-free. Some policies have features that can help transfer money to future family heirs with fewer tax liabilities. Life insurance can often be bundled with other types of protection, like disability insurance, to replace a portion of your salary if you’re unable to work in an unprecedented circumstance. 

Known Benefits for a Whole Life Insurance Plan

  • Permanent life insurance protection
  • Contains an important savings and growth element known as cash value that you can take out or borrow against
  • Can provide tax-advantaged estate planning benefits 

Getting More Value While Buying Life Insurance

The most cost-effective way to buy life insurance would be to do it when you are at a healthier time in your life and young. Life insurance carriers generally give younger and healthier individuals lower rates. These low rates are due to individuals having longer life expectancies, being less likely to have been previously diagnosed with a serious disease and being more likely to pay premiums over a longer number of years. 

Things You Should Know Before Purchasing Life Insurance

  • Review your lifestyle needs: What policy is going to serve you best? It’s a good idea to talk to an insurance agent at StarFort about this, as they can help customize a plan that works for you. 
  • Decide the amount of coverage you need: How much income do you provide to your family? Do you have a plan for your family to estate taxes and cover outstanding debt after your death? Review your answers carefully and make sure that you buy enough life insurance to cover the unexpected financial burden of a death.  
  • Review your current life insurance policy: If you already have a life insurance policy, do not cancel it until you have received the new one. You then have a minimum period to review your new policy and decide if it is what you want. Keep in mind that you may not have to cancel your current policy. You may be able to change your policy to get the coverage or benefits you want now.
  • Permanent life insurance is one of several types: whole life, universal life and variable life. 
  • Compare the two different kinds of life insurance policies: term and permanent. Term insurance generally has lower premiums in the early years but does not build up cash values that you can use in the future. Permanent life insurance has multiple options. Your choice should be based on your needs now and in the future and what you can afford.
  • Can you afford premium payments? Before you take the leap to purchase life insurance, measure if the premium payments are in your budget, now and the future. 
  • Read Your Policy Carefully: Do premiums or benefits vary from year to year? How much do the benefits build up in the policy? What part of the premiums or benefits is not guaranteed? What is the effect of interest on money paid and received at different times on the policy? These are all questions that you should be able to answer by reading your policy thoroughly. Your agent can help you understand things that are unclear.
  • Review Your Life Insurance Program Every Few Years. How will inflation affect your future needs? Do you need more insurance when your family size increases? Review your policy with your agent every few years to keep up with changes in your income and needs.

Choose Your Life Insurance Plan with StarFort 

StarFort Financial is a leading life insurance advisory firm representing high net worth clients across the United States. We tailor insurance solutions that fortify wealth within estates and businesses. We pride ourselves on our unwavering commitment to being loyal financial advocates for our clients. Our team implements and manages tailored life insurance solutions for individuals and businesses. Our customized insurance solutions are designed to protect your assets, mitigate risk, and produce tax-efficient cash accumulation. Talk to us today to set up your plan!