NEW TO LIFE INSURANCE?
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Our interactive guide will help you determine your life insurance needs
One of the most common questions we get at JRC Insurance Group is, “What is life insurance?” Life insurance is designed to protect a family, a mortgage, or a business from debt or loss of income in the event of someone passing away.
How Does it Work?
Every life insurance contract has an “insured” person and one or more beneficiaries. If the insured dies while coverage is in place, the insurance companies pays a death benefit (typically a lump sum of money) to the named beneficiary.
Also be sure to see our article: Life Insurance Basics
Reasons to Buy Life Insurance:
Why might someone buy life insurance? The most common reason people buy life insurance is to protect their family. If you or your spouse were to pass away, how would your bills get paid? Would your family lose the house, or would your children be able to attend college? If your loved ones would suffer from a financial lose if you passed away, you are a candidate for life insurance.
Life insurance is designed to replace lost income, or to pay off debt. Another common reason for life insurance is to protect a business. If your business partners would suffer a financial loss in the event of your passing, an insurance policy to protect your business partners from this unforeseen loss would be considered a “key-man” policy.
Businesses can also utilize life insurance for “buy-sell” agreements, or to buy out a business partner’s share in their collectively owned company in the event of a business partner’s passing. This money is typically paid to the insured’s surviving family in exchange for their share of the company’s equity.
Life insurance is also used to secure a SBA loan from a bank. We have dozens of clients who have purchased life insurance to back-up a loan to purchase everything from Country Clubs on Golf Courses to dental offices. In addition, life insurance is also used to protect your co-signers from personal debt like student loans.
Types of Life Insurance:
Life insurance can be purchased as a “term”, or a period of 1 to 30 years where the rates are guaranteed not to change (see our articles answering the question “what is term life insurance?”) or as a Guaranteed Universal Life policy where the rates are guaranteed until age 90, 95, 100 or even 121.
Life Insurance can also be purchased as Whole Life insurance, which has a cash value, but it is not usually recommended due to the cost, and as Universal Life. Universal Life is not recommended by most financial experts however. This is due to the overall low return of investment on these products and high costs. What is Life Insurance? Life insurance can be used for a variety of financial goals, but life insurance is not typically a good vehicle for investment.