Whether you’re married with children or single with an outstanding mortgage, life is filled with unexpected turns that affect earnings. Life insurance protects policyholders from loss of income. Many families, however, are confused about how coverage works and why it’s needed.  If you’ve been wondering about this type of insurance, here are answers to four frequently asked questions.

Your Life Insurance Questions Answered

How does life insurance work?

A contract with an insurance company stipulates coverage terms for the payment of funds to beneficiaries after a person dies. The policyholder pays premiums to an insurer to obtain a policy. Upon the policyholder’s death, a spouse, children, or other relatives receive payments to cover financial obligations, funeral costs, and related expenses. 

How much coverage do I need?

One rule of thumb to determine how much life insurance you need is to multiply your current annual income by 10. However, agents recommend reviewing several factors to select adequate coverage amounts. These include whether you’re the sole income provider in your household or have children or outstanding debts, such as a mortgage or credit card balances. 

What type of life insurance is available?

The two main types are term and permanent. Term coverage is available in time frames, typically ranging from 10 to 30 years. You pay premiums for your preferred term. If you should die unexpectedly during the term, your beneficiaries will receive a death benefit. Term life insurance rates are fixed and are generally lower if you secure coverage when you’re younger.

Permanent life insurance works the same way with the exception that coverage lasts a lifetime. As long as you’re current on your premiums, your beneficiaries will receive financial support. In addition, permanent insurance allows you to make cash withdrawals while you’re still alive. 

Do I need it?

If you have a spouse or children that depend on you financially, life insurance will help pay for expenses should something happen to you. These include paying off debt, temporarily replacing lost income, and paying for a child’s college education. Having a policy in place ensures your loved ones remain financially stable without your income.

For more than 40 years, Taake Insurance Agency in Columbia, IL, has helped individuals and business owners across Monroe County and in  surrounding communities make informed coverage decisions. What makes the family-owned business different is their accessibility, extensive industry experience, and personalized attention. If you have additional questions about life insurance, call (618) 281-7656 to speak to a professional and friendly agent. You can also go online to compare quotes from several leading insurance providers.