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A life insurance policy is an agreement between an insurance company and the policyholder. This policy guarantees that when you pass away, the insurance company will pay a sum of money to the designated beneficiary.

Important things to know about Life Insurance:

1. It is a legally binding contract/agreement.
2. For the contract to be enforceable, all high-risk activities and policyholder’s past and current health conditions must be disclosed.
   For the policy to remain active, the policyholder must either make a single premium payment up front or continue to make regular payments over time.
3. When the policyholder passes away, the named beneficiaries will receive the death benefit payment.
4. Term life insurance policies have an expiration date.
5. Permanent life insurance policies are active until the policyholder passes away, payments are discontinued or the policy is surrendered.

Life insurance policies share two main components, death benefits and premiums. If you have a permanent or whole life insurance policy, then you would also have a cash value component.

Death Benefit – The amount of money paid to the beneficiary designated on your policy.

Premium – These are the payments made towards your policy. Premiums depend on the amount of the death benefit, risk of the individual or if it is a policy that has cash accumulation.

Cash Value – Can be used as a savings account during your lifetime as the cash will accumulate on a tax- deferred basis. You can also take out loans against the accumulated cash value or pay policy premiums.

Each insurance company evaluates applicants on a case-by-case basis. Age and health play a factor in qualifying for life insurance. They also take into account your overall lifestyle. The good news is there are many types of life insurance policies available to suit your needs.

Who benefits from Life Insurance?

• Parents with underage children
• Parents who have adult children with special-needs
• Adults who are co-owners of property
• Elderly parents who want to compensate their adult children for any care they provided.
• Young adults who have student loans or loans co-signed by their parents and want to make sure they will not inherit their debt.
• Young adults who want to lock in lower rates.
• Wealthy families who expect to owe estate taxes.
• Families who cannot afford burial and funeral expenses
• Businesses with key employees
• Married pensioners

It is important to check your finances and do your research to ensure that the amount of life insurance you are getting is enough to maintain the standard of living of your beneficiaries.