Life Insurance Definition: What Does It Mean For You?

Insurance Definition

Life insurance can help you protect your family from losing their main source of income and assets if something were to happen to you, like an accident or sickness. 

The life insurance definition is much more complicated than most people realize, however; it’s not simply a policy that will pay out if you die. In fact, it’s important that you understand what your life insurance policy covers, what to look out for, and how it fits into the bigger picture of your financial goals before deciding whether or not this type of insurance makes sense in your own life.

 Life Insurance Definition: What Does It Mean For You?

Part 1 - The Difference Between Whole, Term, and Universal Life

What does the term life insurance mean to you? We all know that life insurance protects your family if anything unexpected should happen, but what is its definition and why do people choose different types of insurance policies over others? Life insurance comes in two flavors: whole life and term. 

Whole life is typically a more expensive type of policy that pays out as long as you live. Term insurance only pays out as long, say 10 years, as you're paying your premiums; at the end of the term, the policy expires.

Part 2 - Do You Need a Life Insurance Policy?

It's not easy to think about how much your loved ones would need to deal with once you're gone. The good news is there's a solution - a life insurance policy. But before deciding if it's right for you, it can help to know the basics of what life insurance means and how it might help your family out.

Part 3 - How much life insurance do you need?

It's important to consider how much life insurance you will need, and the type of policy that is best for you. Here are a few things to keep in mind when deciding on how much life insurance you will need. First, how much money will your family depend on if you were to pass away? 

Second, what is the reason for purchasing life insurance to replace income or pay for final expenses and debts? Third, what are your age, occupation, and health at this time?

Part 4 - Picking the Right Policy Type

To make your life insurance meaning a little easier, know that there are two types of life insurance policies: permanent and term. Permanent life insurance is for people who want their loved ones to receive a lump-sum payment if they die. 

Term life insurance is for people who want monthly payments from an insurer until they reach the age of 100 years old, or die.

Part 5 - Buying an Individual Policy or Group Policy

Individual policies are typically less expensive than group policies, but because they don't cover the entire population, they may not be as comprehensive. 

Group policies offer more coverage at a lower cost because they spread the risk over more people.