Life Insurance
What is life insurance
Life insurance is a contract between you and an insurance company that promises a monetary payout, commonly called a death benefit, to designated beneficiaries — typically family members — after you pass away. As long as you’ve paid your premiums and the policy is active upon your death, the death benefit will be paid out.
Once you’ve reached certain milestones in your life — like getting married, buying your first home, or welcoming your first child, for instance — it’s time to consider the not-so-fun topic of how your family or other dependents may fare upon your passing. Life insurance guarantees your loved ones a safety net in the event you die, which is especially important if anyone is financially dependent on you.
Let’s explore the basics of life insurance, including how it works, common types of life insurance and more.
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In order to obtain life insurance, you must qualify by submitting an initial application. The process typically includes a phone screening and a medical examination to determine your health status, including any chronic or pre-existing conditions. Your health information is a major contributing factor to your life insurance premium. Once you finalize how much life insurance you need and your rate, you must keep paying your premium to keep the coverage in place.
After you pass away, your beneficiary must file a claim with the life insurance company and submit relevant documentation, such as a death certificate. The beneficiary may choose how the death benefit will be paid out to them — either via lump sum or annual payments. Each life insurance payment option is paid out tax-free.
