The importance of life insurance

It is especially important to purchase a life insurance policy when you reach key milestones in your life or when someone else becomes dependent on you — for example, marriage, or the birth of a child. 

In the unfortunate event of your passing, life insurance can protect your loved ones from financial unknowns and give them some peace of mind during a very difficult time. There are also life insurance policies you can use to diversify your investment portfolio where you can receive cash benefits while you are alive. 

Protecting your beneficiaries 

A beneficiary is the person(s) who you choose to be the recipient of funds from your life insurance policy. At the time of your passing, your beneficiaries will receive a flat sum based on the amount allowed by your policy. You may choose whomever you want as your beneficiary, regardless of their relationship to you. 

Life insurance protects your beneficiaries by: 

• Helping them to maintain their standard of living if they relied on you for financial support 
• Helping them pay costs associated with your passing, such as funeral costs, burial costs, and death taxes 
• Helping to pay off debts and immediate expenses, such as a mortgage 
• Providing an inheritance to a child or minor to set them up for their future 

Types of life insurance policies 

There are many different types of life insurance plans to choose from. 

Level premium term life 

A level premium term life insurance plan provides life insurance protection for a specified period of time (for example, five, 10, 15, 20, or 30 years), during which the policy’s annual premium remains the same. The beneficiary will only receive the allotted benefits if the policyholder dies while the policy is valid. 

Whole life 

Unlike term life policies, this type of policy is designed to stay in effect throughout the policyholder’s lifetime. Premiums typically remain level for the duration of the policy. A portion of each premium payment is set aside to earn interest. The amount earned can be accessed during the policyholder’s lifetime. 

Universal life 

These policies are very similar to whole life policies. The major difference is that the policyholder is given a degree of flexibility to modify the policy amount and/or premium based on changing needs. These policies can also provide cash value which can be accessed during the policyholder’s lifetime. 

Choosing the right policy for you 

The type of life insurance policy that you should choose depends on your financial goals and circumstances. For example, foreign nationals purchasing life insurance in the US face different challenges than US citizens. An experienced insurance representative can help you decide which policy type is right for you.  

Questions to ask when you meet with an insurance representative

• Does the cost of the policy change over time? 
• How long will the policy last? Does it expire at a certain age? 
• Does the policy travel with the policyholder if the policyholder moves to another country?