St louis Life Insurance 101
If you're new to life insurance, it can be overwhelming to sift through all the information out there. Learn the basics and find out what you need to make an informed decision.
What is life insurance?
No one likes to think about their own death, but it's important to have a life insurance policy in place in case the unexpected happens. A life insurance policy provides financial protection for your loved ones in the event of your death. The death benefit from a life insurance policy can be used to cover a variety of expenses, like mortgage or rent payments, education costs, funeral arrangements, and more.
A life insurance policy is made up of four components: the death benefit, the premium, the policy term, and the cash value. The death benefit is the lump-sum payout that your loved ones will receive if you die while the policy is active. The premium is the amount you pay for the policy, and the policy term is the length of time the policy is active. The cash value is the money that accumulates over time and can be used if you need to cancel the policy.
Insured - The person whose life is covered under the policy. Typically, this is the person who owns the policy and pays the premiums, however, it is possible for the policy owner and payor to be someone other than the insured.
Beneficiary - The person(s), entity, or institution(s) that receive the death benefit if the insured person dies. You can name one person (or more) as beneficiaries when you purchase a policy.
Premium - The money paid to keep a policy active. Payment ensures that the insurance company will provide your beneficiaries with the stated death benefit in the event of your passing. If you stop paying premiums, the policy lapses.
Death benefit - The money paid out if the insured person passes away. Death benefits are generally not subject to an income tax and beneficiaries usually receive the benefit in one lump-sum payment.
What is the right amount of life insurance for you?
It depends on your personal and financial circumstances. In general, you can find your ideal coverage amount by calculating your long-term financial obligations and then subtracting your assets. The remainder is the gap that life insurance needs to fill.
How much does life insurance cost?
It all depends on your unique situation. The biggest factors that can affect your premium include:
The type of policy you choose: Whole life policies tend to cost more than term life policies because they last for your entire life, and accumulate cash value.
The type of underwriting experience you want: Simplified and guaranteed issue policies tend to be more expensive because they don’t require full underwriting and are written without a medical exam.
Your coverage amount and term length: Less coverage and shorter term lengths tend to cost less–that’s another reason whole life policies cost more, they never expire.
Your age: Younger people typically have lower rates.
Your health status: Healthier people typically have lower rates.
Your tobacco use: Non-smokers typically have lower rates.
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