Let’s get back to the basics: Life Insurance 101 – The questions you need answered
According to a 2020 LIMRA study, 41 million Americans without life insurance admit that they need it. This is largely due to a misconception about costs, as half of the study’s respondents estimated that life insurance was three times more expensive than it is. Educating yourself on life insurance, coverage options, and pricing is necessary to make an informed decision. What are the basic questions about life insurance? What works best for you?
What is life insurance and how does it work?
Life insurance is a contract between you and an insurance company. You pay premium payments in exchange for a potential lump sum (known as a death benefit) that beneficiaries receive after your death. This death benefit can be used towards bills, mortgage, college tuition, and other expenses.
What is a life insurance premium?
A premium is the payment that covers your portion of the insurance policy. At WAEPA, you can pay your life insurance premium annually, semi-annually, quarterly, monthly, or bi-weekly. Our premium calculator will help estimate your rates and identify potential savings.
Do I need life insurance?
Life insurance will offset the financial burden on your loved ones if you pass. It can cover virtually any type of living expense, including burial costs, medical bills, housing, and retirement. WAEPA’s Life Insurance Needs Analysis will help you better understand the coverage you need.
Which type do I need?
It all depends on your current and future situation.
Term life insurance lasts for a defined period (the “term”) and pays a lump sum if you pass during that time. These policies are typically cheaper and last 10 to 30 years. You can also purchase add-ons to customize your coverage. Term life insurance typically offers the most amount of coverage for the lowest initial premium.
Whole Life / Permanent life insurance provides lifelong coverage. It’s more expensive than term life but can last for the duration of your life while building cash value. Whole life offers a fixed death benefit with the cash value component growing at a guaranteed rate of return. Many whole life insurance policies pay out dividends that can be used to reduce premium payments or can add to your cash value.
How long of a term do I need it for?
This is based on your age and how long you need coverage. Policy lengths range from 10 to 30 years.
No one likes to think about their own mortality, but these answers will help put things in perspective. Life insurance is an important part of your financial future, even on a tight budget. WAEPA will gladly walk you through any questions to ensure you’ve got the information you need when purchasing life insurance. For more information, please reach out to info@waepa.org or call (888) 353-1308.
Join WAEPA Today
You can apply for Group Term Life Insurance* at any time of the year (no Open Season or qualifying life event required). After more than 75 years of serving Civilian Federal Employees, WAEPA is the life insurance choice of over 46,000 Feds and their families. Calculate how much coverage you should consider and apply today.
*Underwritten by New York Life Insurance Company