If you’re new to life insurance, and not really sure how it works, you’re not alone. Most people looking into coverage for the first time need to learn how it works. The good news is, once you understand, it’s easy to make the right decision for you and your family.

What Is Life Insurance?

Most of us have had some experience with insurance. Colorado Car insurance lets us drive legally, medical insurance keeps us healthy and homeowner’s insurance protects our investment. But life insurance is a little different. Rather than insure an object like your home or car, life insurance allows you to insure, well, you.

Basically, in exchange for making premium payments, an insurance company agrees to pay a sum of money, known as a death benefit, to chosen beneficiaries upon the insured’s death. A life policy offers peace of mind, and financial protection for family and loved ones. There are basically two main types of life insurance: Permanent and Term.

Permanent

Designed to provide coverage for an entire lifetime, with tax-free money paid to beneficiaries when you die. Some permanent life insurance can help you while you’re living too. A portion of each premium accumulates towards the ‘cash value’ of your policy, which grows tax deferred over time. If you need to borrow money from your policy as it grows—say for your children’s college tuition or home improvements—you can.

Term

Provides coverage for a set period of time, like 10, 20 or 30 years. In general, the premium is lower than permanent. But, once the term ends, so does your coverage. If you choose to continue, premiums may increase significantly. Term life insurance is a low cost, temporary way to ensure your family’s financial responsibilities will still be met in the event of tragedy.

How to Choose  

If you need coverage for your entire life, or you are interested in building cash value that you can use down the road, permanent life insurance in Colorado may be a good option. There are different types, such as whole life insurance and universal life insurance that offer slightly different options. Remember, if your goal is to build cash value, the sooner you buy, the more time you will have to grow tax-deferred savings.

On the other hand, if you’re looking for an inexpensive way to provide a financial safety net for your family during your working years, term may be more appropriate.

How Much Does Life Insurance Cost?

How much you pay is based on many variables, including the amount of coverage you choose, age and medical history.In general, the younger and healthier you are when you buy, the less your policy will cost. Of course, lifestyle plays a role too. If you smoke, your premium will likely be higher than someone who doesn’t smoke.

The specific coverage amount (how much money will be paid to your beneficiaries) is up to you, but should be based on a few general factors including:

• Your potential income
• Your assets and debts
• Current insurance
• Family needs (education, mortgage etc.)

Many people choose coverage based on where they are in their life journey. For instance, the insurance you might consider when you first get married may be different from coverage you need when you have a young family to support, or start a business.

It makes sense to talk to someone who can guide you through these important decisions based on your unique situation. If you’re ready to explore some options, give us a call. We’re here to help, and we look forward to helping you navigate your choices.

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