Life Insurance 101 - Protect What Matters Most
Life Insurance 101
Life insurance is a crucial part of a strong financial strategy, providing proper protection for you and your loved ones. Explore the different types of coverage available and discover how the right policy can help safeguard your family's future. Whether you're getting coverage for the first time or updating an existing policy, we’ll help you find a solution that fits your needs and goals. Learn about different types of life insurance for beginners and find a policy today.
How Much Life Insurance Do You Need?
When it comes to the best type of life insurance for an individual, there is no one-size-fits-all. How much and what type of coverage is needed is based on the individual and their:
- Age
- Health
- Income, current financial situation
- Number of dependents
Furthermore, the life insurance policy most suited for an individual may change over time. Major life events like getting married, divorced, having children, or changing your income can all influence your life insurance policy.
Based on these considerations, a basic rule of thumb is to have enough life insurance coverage to provide approximately 10 times your annual household income. For example, if the current household income totals $50,000, consider having a total of $500,000 in life insurance protection.
- 42% of American adults say they need life insurance or more of it
- 56% of households earning under $50,000 per year have a life insurance need
- 102 million American adults have a life insurance gap need
Types of Life Insurance
Life insurance comes in many forms to fit different budgets, lifestyles, and financial goals. Some individuals may need coverage for a set period, while others require long-term protection with added flexibility. At WFG, our experienced agents work closely with clients to find policies that align with their needs and budget. Let us help you find the right plan to safeguard your future.
Two of the most common types of life insurance are term life insurance and permanent life insurance.
Term Life Insurance
Term life insurance offers individual life insurance protection for a specified number of years (i.e., term). This type of insurance is usually less expensive than permanent insurance with the same face value. However, term insurance does not accumulate cash value.
Permanent Life Insurance
Permanent life insurance, including whole life coverage, remains in effect until the policyholder’s death as long as the premium payments are made, unless the policy lapses or is surrendered. Most permanent life insurance policies also have some type of savings component that can build cash value over the life of the policy.
| Feature | Term Life Insurance | Permanent Life Insurance | ||||
|---|---|---|---|---|---|---|
| Tax-Free Death Benefit | Yes | Yes | ||||
| Lower Premium | Yes | No | ||||
| Access to Cash Value | No | Yes | ||||
| Guaranteed Minimum Interest Rate1 | No | Yes | ||||
| Market Participation2 | No | Yes | ||||
| Flexible Premium Payments3 | No | Yes |
1 Varies on the type of permanent life insurance.
2 Depends on the type of permanent life insurance. Not all permanent insurance participates in the stock market or index funds.
3 Whole Life Insurance does not allow for flexible premium payments. Subject to certain limitations, premiums may be increased, decreased, skipped or stopped on other types of permanent life insurance policies, such as universal life insurance. However, the risk of a policy lapsing increases if regular premium payments are not made.
