Life insurance can be an incredibly useful decision for a range of people. The right plan can help protect your loved ones, protect your finances, and give you added peace of mind. However, life insurance can be complicated. There are many moving parts, and an array of policy types are available. Knowing the basics can help you figure out which plan is right for you.
This article will explore life insurance and its features and cover several policy types to consider. Then, we’ll dive deeper into how to get a policy and explain what kinds of people could benefit the most from life insurance.
Life insurance is a financial product that helps protect your beneficiaries if you pass away by paying them a lump sum. In exchange, you pay regular premiums to maintain coverage.
The goal of getting life insurance is to provide loved ones with an added safety net in case you pass away. It can help them cover lost income, help pay debts, save for emergencies, pay for funeral expenses, and fund long-term financial goals.1
Don’t wait until it’s too late. Help cover yourself and your family with coverage from Aflac.
Life insurance contracts contain several features:
The policyholder is the individual who buys the life insurance plan and is responsible for paying premiums. If the policyholder dies, the death benefit can be paid to their beneficiaries.
The beneficiaries are the parties the policyholder designates to receive the death benefit when the policyholder passes away. Beneficiaries can be individuals, qualifying charitable organizations, and certain life insurance trusts.
The death benefit, also called the face amount, is the amount the insurer pays to beneficiaries if the policyholder passes during the policy term. Beneficiaries should file a claim with the life insurance company after the policyholder passes away to claim the death benefit.
Premiums are the amounts the policyholder pays to maintain their coverage. Without paying premiums, the policy can lapse, causing the policyholder to lose coverage. Most insurers allow policyholders to pay premiums annually, semi-annually, quarterly, or monthly.2
Coverage length, or term length, is the time the life insurance policy is active. Some policies, such as term life insurance, only last for a fixed period. On the other hand, permanent plans last for life.
Cash value is a growth component of permanent life insurance that allows you to build wealth through your life insurance policy. The insurer puts part of each premium payment into the cash value, growing tax-deferred at a rate that varies by policy type. As this component grows, you can borrow or withdraw from it. If you surrender your policy, you get your cash value back minus surrender charges.
Consider these life insurance policy types:1
A term life plan covers you for a period, typically from 10 to 30 years.3 If you pass away while the plan is active, your beneficiaries can file a claim to get the death benefit. However, your policy will expire if you live through the policy term. You must renew your term policy or apply for a new one to keep your coverage. Term life insurance premiums are typically lower when compared to the sizable death benefit. Aflac can help you get a term life insurance policy if you need coverage that fits your budget.
Whole life insurance is permanent, so it lasts for a lifetime and comes with cash value. The cash value accumulates at a fixed, guaranteed rate that depends on prevailing interest rates. This means the cash value grows more slowly, but you typically don’t have to worry about losses. If you’re looking for lifelong coverage and guaranteed cash value growth, Aflac can help you get a whole life insurance policy.
Final expense insurance is a smaller whole life plan that helps cover funeral costs, medical bills, and other end-of-life expenses. The death benefit is small, but premiums are typically lower, and there is typically no medical exam. These policies also cover you for life and offer cash value. Aflac final expense insurance comes with reasonable premiums and lifelong coverage.
A universal life insurance plan is a form of permanent life insurance that lets you adjust your premiums and death benefit within limits. Raising your death benefit increases premiums, while lowering your premiums reduces your death benefit. Additionally, universal life insurance tends to cost less than whole life insurance.4 Universal life insurance may also let you pay premiums with cash value when it grows large enough. However, if the policy shrinks too much, coverage can lapse. Aflac does not offer universal life insurance.
Variable life insurance coverage operates the same way as universal life insurance. However, you can invest your cash value into individual securities, such as stocks, bonds, and mutual funds. As a result, you can potentially enjoy faster growth. However, you also risk incurring losses. It’s smart to work with a financial advisor to select investments for your variable life insurance cash value. Aflac does not offer variable life insurance.
Here’s how to get a life insurance policy:1
Here’s who may want to consider getting life insurance:
Life insurance can help parents protect their partners and children. If the policyholder passes away, the surviving partner can use the payout to help with loss of income, help pay debts, and save for their children’s college.
Both parents should consider life insurance, even if one is a stay-at-home parent. If the stay-at-home parent passes away, the working parent can use the death benefit to help with childcare and household services.
Couples can benefit from life insurance even if they have no children. If one partner passes away, the other can rely on the death benefit for added financial security — especially if they live together.
Furthermore, couples could use the cash value to help build wealth early in life. If they decide to have children, that cash value may be large enough to help fund relevant goals like purchasing a larger home or paying for college.
If you pass away with debt, your estate may be used to pay those debts off. This can leave heirs with significantly fewer assets than you want them to have, especially if you pass away with large loans like mortgages and auto loans.
A life insurance policy helps alleviate these concerns. Loved ones can use the proceeds to help pay most or all of your outstanding debts. Your heirs, therefore, get to keep more of your estate and potentially any remaining death benefit.
Retirees can use life insurance for legacy planning purposes. Life insurance death benefits can be subject to fewer or no taxes when structured correctly in an estate plan. As a result, retirees can leave a larger legacy to their heirs or favorite charitable causes when they pass away. Furthermore, the cash value can help them to assist their children and grandchildren financially. For example, it can help pay for college tuition and other expenses.
Young, single adults may think they don’t need life insurance, but there are plenty of reasons to consider it. For example, life insurance can help ensure your parents are cared for as they age. If you pass away early, the death benefit can help your parents cover medical expenses, long-term care, and similar costs. Life insurance can also help young adults with complex financial needs and open additional avenues to build wealth through cash value.
One advantage young adults have is that they may qualify for the lowest life insurance rates, since age is a significant factor in calculating premiums. Once you purchase a policy, you typically lock in your premiums for the duration of the policy term.
The right type of life insurance policy for you depends on your coverage needs and budget. For instance, if you’re starting a family and want to be covered until your children become adults, you may consider a term life policy. Or, if you’re older and can afford enough coverage for your loved ones to cover your end-of-life expenses, final expense insurance may be right for you. It's advisable to consult with a financial advisor or insurance agent who can assess your individual situation and recommend the most suitable policy for your needs.
Life insurance can be a key component of your overall financial plan. It can help protect your loved ones, help you build wealth, and gain added peace of mind. There are many types available, helping you choose your coverage to your circumstances.
Aflac offers several insurance policy choices, including final expense, term, and whole life insurance. Chat with an agent today to explore your options and find the best life insurance policy for your needs.
1 Forbes – How Does Life Insurance Work? Updated September 2, 2022. https://www.forbes.com/advisor/life-insurance/how-it-works/. Accessed May 19, 2023.
2 Bankrate – What is a Life Insurance Premium and How Does It Work? Updated March 9, 2023. https://www.bankrate.com/insurance/life-insurance/what-is-a-life-insurance-premium/. Accessed May 19, 2023.
3 Bankrate – What Happens If You Outlive Your Term Life Insurance? Updated July 21, 2022. https://www.bankrate.com/insurance/life-insurance/outlive-term-life-insurance/. Accessed May 19, 2023.
4 Forbes – Whole Life vs. Universal Life Insurance. Updated April 19, 2023. https://www.forbes.com/advisor/life-insurance/whole-life-vs-universal-life-insurance/. Accessed May 19, 2023.
5 Forbes – How Much Life Insurance Do I Need? Updated January 18, 2023. https://www.forbes.com/advisor/life-insurance/how-much-life-insurance-do-you-really-need/. Accessed May 19, 2023.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance Company of New York.
68000 series: In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. In New York, NY68100-NY68400.65000 series: In Virginia, Policies ICC0965JTO & ICC0965JWO. B61000 series: In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC18B61JWO & ICC18B61JTO. In Delaware, Policies B61JWO, B61JTO. B60000 series: In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Q60000 series: Whole: In Arkansas, Delaware & Oregon, Policy Q60100M. In Idaho Policy Q60100MID. In Oklahoma, Policy Q60100MOK. In Texas, Policy Q60100MTX.Q60000 series: Term: In Delaware, Policies Q60200CM. In Arkansas, Idaho, Oklahoma, Oregon, Texas, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C.
Final Expense insurance coverage is underwritten by Tier One Insurance Company. The life insurance policy described herein contains an optional Accelerated Death Benefits Rider that is intended for favorable tax treatment under Section 101(g) of the Internal Revenue Code. Aflac does not give legal or tax advice. Please consult with a qualified legal, tax, and accounting advisor before engaging in any transaction. In AR, AZ, ID, OK, OR, PA, TX and VA: Policies ICC21-AFLLBL21 and ICC21-AFLRPL21; and Riders ICC21-AFLABR22, ICC21-AFLADB22, and ICC21-AFLCDR22. Tier One Insurance Company is part of the Aflac family of insurers. In California, Tier One Insurance Company does business as Tier One Life Insurance Company (Tier One NAIC 92908).
This is a brief product overview only. Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions. For complete details, including availability and costs, please contact your local Aflac agent.
Aflac does not offer Universal or Variable Universal life insurance.
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