A life insurance policy primarily provides a death benefit to beneficiaries, but the specifics of what can be covered or included in a policy can vary depending on the type of insurance and any additional riders or provisions. Here are the main areas and features typically covered:
- Death Benefit:
Standard Coverage: The primary feature of all life insurance policies is the payment made to beneficiaries upon your death. This amount is generally tax-free and is intended to help cover financial needs such as funeral expenses, outstanding debts, and living expenses.
- Types of Policies and Their Specifics
- Term Life Insurance: Provides coverage for a specific period (e.g. 10, 20, or 30 years). It pays out the death benefit if you die during the term.
- Whole Life Insurance: Offers coverage for your entire life and includes a cash value component that grows over time. It provides a death benefit and can also serve as an investment vehicle.
- Universal Life Insurance: Provides flexible coverage with adjustable premiums and death benefits, and includes a cash value component. The cash value earns interest based on market rates.
- Variable Life Insurance: Includes both a death benefit and a cash value component that can be invested in various options, such as stocks or bonds. The cash value and death benefit can vary depending on investment performance.
- Additional Riders and Benefits
- Accidental Death Benefit Rider: Pays an additional benefit if death occurs due to an accident.
- Critical Illness Rider: Provides a lump sum payout if you are diagnosed with a critical illness covered by the rider, such as cancer or heart disease.
- Disability Waiver of Premium Rider: Waives premium payments if you become disabled and cannot work.
- Child Rider: Provides coverage for your children, often offering a death benefit if a covered child passes away.
- Long-Term Care Rider: Allows you to access part of the death benefit while you are alive to pay for long-term care services.
- Cash Value Component (for Permanent Policies)
- Growth of Cash Value: Permanent life insurance policies (e.g. whole or universal life) accumulate cash value over time. This can be accessed through policy loans or withdrawals.
- Policy Loans: You can borrow against the cash value of the policy. Loans must be repaid with interest; otherwise, they will reduce the death benefit.
- Terminal Illness Benefit
- Early Payout: Some policies offer an advance payment of the death benefit if you are diagnosed with a terminal illness and have a limited time to live.
- Conversion Options
- Term-to-Permanent Conversion: Some term life insurance policies offer an option to convert to a permanent policy without needing a new medical exam
- Premium Flexibility
- Flexible Premiums: Universal and variable life insurance policies often offer flexibility in premium payments, allowing you to adjust the amount and frequency.
Each policy and rider can vary in terms of specifics, so it’s important to carefully review the terms and conditions of your life insurance policy. Call us to speak with one of our licensed professionals to ensure it meets your financial goals and expectations.