What you need to know about purchasing life insurance

What You Need to Know About Purchasing Life Insurance

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Life insurance is a great addition to your portfolio that help can protect your loved ones and beneficiaries if you unexpectedly pass away. While no amount of money can ease the grief of losing someone, life insurance may help reduce the financial burden they may face. It’s important to know how life insurance works and what to consider when purchasing life insurance so you can make an informed decision before you buy.   

What does life insurance cover?

Life insurance can be used to help your beneficiaries pay for your funeral costs, and a variety of other expenses, including:

  • Everyday bills
  • Wage loss
  • Childcare
  • Debts
  • College tuition
  • Business debts

It’s important to note that life insurance benefits will not apply if your death results from suicide, criminal or hazardous activities, or murder by a beneficiary.

What Are Some Types of Life Insurance?

There are numerous types of life insurance products on the market. A few of the most common types include:

  • Term Life Insurance: Term life insurance guarantees financial protection for your family over a specific term. 
  • Whole Life Insurance: Whole life insurance provides insurance for your entire life, as long as you pay the premiums on time. The cash value increases over time, providing you with cash accumulation you can use in retirement or increasing your beneficiaries’ benefit.
  • Indexed Universal Life Insurance: Indexed universal life insurance includes a death benefit and a cash value component that increases based on the index you choose, helping to increase the policy’s value over time. 

The type of policy you select should depend on how much you want to pay and how long you’d like your coverage to last. Remember that your age, gender, medical history, nicotine use, and dangerous hobbies may all play a role in how much you pay for life insurance. Generally speaking, the healthier and younger you are, the less expensive your policy will be. 

How Do Life Insurance Ratings Work?

Life insurance company ratings reflect the opinions of independent agencies like A.M. Best, Fitch, and Moody’s. Each agency has its rating scale and standards. A.M. Best, for example, looks at the balance sheet, performance, and business profile of the companies it rates. Its six ratings include:

  • A++, A+ (Superior)
  • A, A- (Excellent)
  • B++, B+ (Good)

Before you move forward with purchasing a life insurance company’s policy, it’s important to consider their rating from at least two agencies.

Talk to us today

We can work with you to determine an appropriate death benefit amount based on your situation, and help evaluate companies that have suitable performance ratings. The bottom line is to make sure you’re beneficiaries can pay expenses and have a reduced financial burden when you pass.

© 2024 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. These materials are for informational and educational purposes and are not designed, nor intended, to apply to any person’s individual circumstances. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Please consult with your legal and/or tax advisor before making any tax-related decisions.