CG Wealth Solutions life insurance protects what matters most and provides important living benefits

Life Insurance 101: What you need to know

It’s OK if you think life insurance is complicated. You may know you need it, but if you don’t know where to start, the process can seem overwhelming. Let’s start with some terms to help you understand the basics of life insurance.

  • Premium: money you pay for your insurance policy
  • Death benefit: amount of money your insurance policy pays your beneficiaries in the event of your death
  • Beneficiary: individual you select to receive your death benefit
  • Cash value: money from your premium put aside to grow in investments and earn interest over the length of time you own your policy

Our products help protect what matters most. They are designed to be competitive over the long haul.

What life insurance can do for you

Life insurance is one way to protect your family and help make sure loved ones are taken care of in the event of your death. While protecting the financial security of loved ones is a critical use of life insurance, there are other reasons why you might want it as part of your financial plan.

  • Help provide for those who are dependent on your income
  • Pay for your funeral
  • Pay outstanding medical bills or debt
  • Assist your spouse with retirement funds
  • Provide a legacy to a charity you care about
  • Use as part of an estate planning strategy to pass more wealth to future generations

Understand the basics

Term insurance is the most affordable and common type of life insurance. It’s called “term” because it provides protection only for a specific amount of time, typically between five and 30 years. You can think of term insurance like renting a house. You pay premiums throughout the defined duration. If you die during that time, your beneficiaries will receive a death benefit, which can be used to pay bills, settle debts or help provide for those who depend on your income.

Term Life Insurance
Generally life insurance can be divided into two categories – term and permanent. Understanding each type can help when you are ready to buy life insurance.

Keep in mind, term insurance is not permanent and does not build cash value. Benefits are paid only if you die during the policy’s term. Term may make sense for you if cost is a primary concern, with affordable premiums making life insurance easier to fit into your budget.

Permanent Life Insurance
Permanent life insurance is similar to buying a house. Permanent insurance lasts the duration of your life and combines death benefit protection with the ability to build cash value, similar to building up equity in your home. Generally, you have two options to choose from within permanent life insurance – whole life and universal life.

Universal life insurance is known for flexibility. Part of your premium payment goes toward building cash value in your policy. Within limits, you can choose when and how you pay your premiums. You can pay less when money is tight or more when you want to increase your policy’s cash value. Universal life insurance might be right for you if you are looking for protection that can last for a lifetime and can keep up with life’s changes.

With whole life insurance, both the premiums and policy death benefit are guaranteed. You can feel secure knowing your premiums won’t go up and the amount your beneficiaries receive won’t go down. Whole life insurance also features guaranteed cash value growth. Your policy earns a guaranteed interest rate and usually receives dividends. Although dividends are not guaranteed, they are one of the benefits of whole life insurance and can help build cash value.

The cash value associated with both universal and whole life grows tax-deferred, which can help you accumulate more money long term. You can access this cash value at any age and for any reason. Some people access the cash value of their policy to help pay for an emergency or a child’s education. It can also be used to supplement your retirement income or to start a business. Keep in mind that excessive loans and withdrawals may reduce the policy’s cash value and can reduce the policy death benefit.

How much do you need?

Generally, you’ll want a policy that will cover all of your expenses. Some planning specialists believe a good rule of thumb is to buy a policy that would provide the equivalent of five to seven times your annual salary.

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Talk to your financial professional to determine the right type and amount of life insurance coverage you need.