Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance. Not only does he strive to provide you with the ...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Nov 4, 2020

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Nothing is more valuable than your life and your loved ones.

That’s why life insurance is so important.

No one likes to think of not being there for their loved ones. It helps to know they will be financially protected should the worst happen.

If you are unsure of how it works, you’re in luck, because we’re offering informative life insurance for dummies guide.

Looking to compare life insurance policies? We can help. Enter your ZIP code to get free quotes from multiple insurers.

What is Life Insurance?

Life insurance is an insurance policy that will pay out a financial sum to your family when you die.

If you have dependents relying on you for an income, it helps to have life insurance in place.

Your family will receive a one-off cash lump sum in the event of your death.

Plus, you will have the peace of mind knowing they will be okay if you can no longer be there for them.

The family will be able to use the lump sum to pay for your funeral, remaining bills and could even replace an income.

Shockingly, only 44% of American households currently have life insurance, despite its benefits.

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How Does it Work?

Not sure how it works? Our life insurance for dummies guide can help.

All it takes to receive coverage is to pay a monthly payment to a life insurance company.

When you die the company will pay the total coverage amount to your chosen beneficiaries.

If you stop paying your monthly premiums, the life insurance company will have no choice but to cancel the policy.

Consequently, your beneficiaries will not receive the coverage amount.

Do You Need Life Insurance?

Not sure if you need life insurance?

You must ask yourself: will your family survive without your income?

If the answer is no, you will need life insurance.

In one survey, 70% of US households with children under 18 years old, stated they would struggle to meet daily living expenses if the primary earner died.

Unfortunately, someone will have to handle the finances following your death. It could be your parents, partner or children.

Life insurance can reduce a loved one’s suffering, as they won’t have to worry about funeral costs or bills. So, they can focus on the grieving process rather than worry about finances.

The Different Life Insurance Types

There are many different types of life insurance products on the market, so it can be a little confusing.

You can often categorize all the products into two products: Permanent life insurance and Term life insurance.

Take a look at the difference between the two products in our life insurance for dummies guide.

Permanent Life Insurance

If you are looking for a life insurance product for your whole life, this is the product to choose.

Different products will have different options, but you can stop paying in your 90s or pay for a lifetime. The choice is yours.

Permanent life insurance is often the umbrella term for different policies.

So, you can choose from:

  • Universal life insurance
  • Whole life insurance

Whole life insurance offers a fixed premium throughout your lifetime.

Yet, universal life insurance is a little different. It also offers an investment policy.

A portion of the payment will be an investment, which you can choose to borrow in the future.

Many insurance providers will refer to the investment option as “cash value.”

The policy is more expensive than whole life insurance, as a result.

Understanding Cash Value

We understand the whole life insurance process can be a little confusing. There are so many terms to keep up with that it can leave you scratching your head.

That’s why life insurance for dummies can help you make an informed decision. You will obviously be a little cautious about where you place your finances.

A policy with a guaranteed cash value for a guaranteed premium can be a smart financial move. Cash value works with a larger premium at the start of a permanent policy than in a term policy.

The extra premium will be invested into a different account. The policyholder or insurer will also have access to the account to grow the cash value.

The gains earned can be used to:

  • Increase your coverage amount
  • Keep the policy and stop paying monthly premiums
  • Keep the cash value for borrowing in the future

It is advisable to keep the cash value policy until you reach retirement age or death for probable gains.

Tax Benefits for Universal Life Insurance

Another big benefit of investing in universal life insurance is the tax benefits.

The annual earnings on the investment section of the policy will not get taxed. Once you cash out on the policy, the taxable gains are reduced due to the insurance protection.

Also, once you die, the beneficiaries amount will also not face a tax.

So, it can make great financial sense to opt for a universal life insurance policy.

Aren’t you glad you clicked on our life insurance for dummies guide? We thought so.

Term Life Insurance

Heard about term life insurance but not sure what it means? Our life insurance for dummies guide can help.

Term life insurance is more temporary than permanent life insurance. That’s because it will only provide protection for a short-term period.

For instance, you can select a policy to provide coverage for a 10-year, 20-year or 30-year term.

The rate you choose will be locked in for the term period. You also will be unable to move up or down in insurance levels.

So, if you passed away within the term period, the beneficiaries would receive the lump sum. If you die outside of the term period without renewing the policy, your loved ones will receive no money.

Many people often turn to term life insurance for short-term financial protection.

For instance, you might now be paying for your child’s college tuition or are paying a mortgage. Yet, the expensive bills will be gone in 10, 20 or 30 years time.

It’s important to note that most reputable insurers may allow you to move to a permanent product. Yet, you may have to pay larger monthly premiums due to your older age.

Not sure what policy type to choose? Bookmark our life insurance for dummies guide to refer back to down the road.

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Survivorship Policies

Do you want to take out a joint policy with your partner?

You could always consider a survivorship policy, which covers more than one person. There are different policies to choose from.

For instance, you can select a policy that will pay out the lump sum once the first person dies.

This policy can be a little more expensive than a plan that insures only one person. Yet, it can be a more affordable option than two individual life insurance policies.

You can also choose from joint and survivor or last to die life insurance plans.

The insurance policies pay to beneficiaries when the second person dies. The policies are also available for permanent or term coverage.

If one person has good health, the underwriting criteria might also be less strict.

The Life Insurance Coverage You Will Need

No one wants to think of their loved ones struggling to pay their bills.

Life insurance can help you provide for your family when you are no longer in their lives.

To identify how much money you would need to leave behind, you should calculate your expenses.

For instance, do you need to pay for your children’s college tuition or pay for a mortgage?

Try to estimate the cost of your death and the amount your dependents would need to be comfortable.

The best way to identify the cost is to fill in our instant life insurance quote.

Choose the coverage wisely. 40% of consumers believe they don’t have enough insurance to meet their long-term needs.

How to Qualify for Life Insurance

Traditional life insurance is often determined by the risk of your death.

To identify the risk, they will review your:

  • General health
  • Health history
  • Background history
  • Lifestyle

Your general health will determine your qualification.

Many life insurers will have a class rating to determine if you will receive coverage.

If you have a serious or life-threatening condition, you may not qualify for coverage.

If so, consider a life insurance policy that requires no medical exams or questions. It often guarantees to approve a policy.

You may also not qualify for coverage if you are still on probation for a felony.

If you are, you must wait for a year after the probation period is complete to receive the coverage.

Other people who may also not qualify are people who often embark on risky jobs or hobbies.

For instance, a pilot might not qualify or will receive a higher rate for life insurance.

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The Life Insurance Qualification Process

Unless you choose a no medical exam policy, you will have to detail your medical history.

You might also have to meet a paramedical professional to answer health questions. They will take a blood and urine sample.

If your test and answers meet the insurer’s criteria, you can qualify for insurance within a day or two of the life insurance exam.

Conclusion on Life Insurance for Dummies

Unfortunately, you can’t always be there for your loved ones. A policy will ensure that your family will be financially protected.

We hope life insurance for dummies has helped you to make an informed decision.

Don’t forget to share our handy life insurance for dummies guide with loved ones without insurance!

If you want to get the ball rolling, we encourage you to contact us today to discuss your policy needs.

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