Intro To Insurance: Life Insurance
  1. Intro To Insurance: Introduction
  2. Intro To Insurance: What Is Insurance?
  3. Intro To Insurance: Fundamentals Of Insurance
  4. Intro To Insurance: Property And Casualty Insurance
  5. Intro To Insurance: Health Insurance
  6. Intro To Insurance: Disability Insurance
  7. Intro To Insurance: Long-Term Care Insurance
  8. Intro To Insurance: Life Insurance
  9. Intro To Insurance: Types Of Life Insurance
  10. Intro To Insurance: Life Insurance Considerations
  11. Intro To Insurance: Other Insurance Policies
  12. Intro To Insurance: Conclusion

Intro To Insurance: Life Insurance

By Cathy Pareto

Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death. Today, life insurance is used for many reasons, including wealth preservation and estate tax planning. (For background reading, see The History Of Insurance In America.)

Life insurance provides you with the opportunity to protect yourself and your family from personal risk exposures like repayment of debts after death, providing for a surviving spouse and children, fulfilling other economic goals (such as putting your kids through college), leaving a charitable legacy, paying for funeral expenses, etc. Life insurance protection is also important if you are a business owner or a key person in someone else's business, where your death (or your partner's death) might wreak financial havoc.

Life insurance is a great financial planning tool, but should never be thought of as a savings vehicle. In general, there are often far better places to hold and grow your money as you get older.

Who Needs It?
Not everybody needs life insurance. If you are single and have no dependents, it may not be worth the expense. If, however, you have anyone who financially depends on you (even partially), life insurance may be appropriate for you. When considering life insurance, the questions to ask yourself are this:

  • Do I need life insurance?
  • How much do I need?
  • How long will I need it?
  • What type of policy makes sense for me? (this will be answered in our next section)
Your need for life insurance will depend on your personal circumstances, including your current income, your current expenses, your current savings and your family's goals. Rules of thumb might indicate that purchasing life insurance that covers six to 10 times your gross annual income is the right amount of coverage. But, that's merely a guide. Your family may need more or less than that. When deciding how much coverage is necessary, you really have to lay out the details of what you have versus what goals you'd like for your family once you are gone, keeping in mind that their security can often carry a higher price tag than you originally thought. (For more insight, see How Much Life Insurance Should You Carry? and Five Life Insurance Questions You Should Ask.)

Intro To Insurance: Types Of Life Insurance

  1. Intro To Insurance: Introduction
  2. Intro To Insurance: What Is Insurance?
  3. Intro To Insurance: Fundamentals Of Insurance
  4. Intro To Insurance: Property And Casualty Insurance
  5. Intro To Insurance: Health Insurance
  6. Intro To Insurance: Disability Insurance
  7. Intro To Insurance: Long-Term Care Insurance
  8. Intro To Insurance: Life Insurance
  9. Intro To Insurance: Types Of Life Insurance
  10. Intro To Insurance: Life Insurance Considerations
  11. Intro To Insurance: Other Insurance Policies
  12. Intro To Insurance: Conclusion
RELATED TERMS
  1. Life Insurance

    A protection against the loss of income that would result if ...
  2. Key Person Insurance

    A life insurance policy that a company purchases on a key executive's ...
  3. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  4. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  5. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  6. Guaranteed Issue Life Insurance

    A type of financial-protection policy that provides cash to a ...
RELATED FAQS
  1. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
  2. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  3. Which insurance policies do I really need?

    Your needs for insurance depend on your situation and can't be generalized for everyone, but there are a lot of options available. ... Read Answer >>
  4. Is life insurance good for mortgage protection?

    If you are the primary wage earner in your family and you carry a current mortgage on your home, it is important that you ... Read Answer >>
  5. How much life insurance is enough?

    There are many factors to consider when calculating life insurance. Some of those factors include marital status, dependents, ... Read Answer >>
  6. Can your life insurance company sue you?

    Find out when life insurance companies have the right to recover claims. Learn about the most common reasons why a life insurance ... Read Answer >>

You May Also Like

Trading Center