Extend the benefits of life insurance policies to your family

Life insurance is a contract that requires an insurance company to pay a sum of money to designated beneficiaries in the event of the insured’s death. In exchange for the death benefit, the policyholder makes regular payments to the insurance company. Life insurance coverage comes in various forms designed to meet a range of circumstances and needs.

After selecting a plan that’s appropriate for you and your family, you will typically answer questions about your health, age, lifestyle and similar factors as part of the application process. This helps assess your eligibility for the policy and helps determine the cost of premiums—the regular amount you pay for your plan. The insurance company may also request that you undertake certain medical tests.

Some life insurance policies contain an investment component, which may help offset part, or all, of the premium if it performs well. Death benefits are typically not subject to income tax, though state taxes may apply based on jurisdiction.

The two main types of life insurance are term life insurance and permanent life insurance.

As the name suggests, term life insurance is for a set period, generally 10, 15, 20 or 30 years. At the end of the term, the policy lapses and the death benefit expires. Some policies, however, contain an option to extend the term or even convert the policy into permanent life insurance.

Permanent life insurance provides coverage throughout the life of the insured. It is typically more expensive than term life insurance and comes in several varieties, including whole life, universal life and variable life insurance. One type of permanent life insurance includes a long-term care (LTC) rider, which allows policyholders to receive some of its benefits while still alive, if they require long-term care.

Other permanent life insurance policies allow certain changes to the death benefit and premiums, such as the ability to increase or decrease such terms as the insured’s needs change. Some contain a cash component that the policyholder can borrow against for different purposes.

It very much depends on the policy, but aside from the length of coverage there are normally two main differences. Term life insurance is typically less expensive than whole life insurance, which is designed to provide lifetime coverage to the insured. Whole life insurance accumulates cash value over time.

There is no uniform approach to determining how much life insurance to buy一the appropriate policy and level of insurance will differ from person to person. Consider such factors as your age, income, health status and the potential financial impact on your loved ones in the event of your death. You should also think about how your life insurance integrates with your broader wealth management strategy.