Life Insurance Basics
Life insurance is the first step in protecting your loved ones in the event of an untimely death. Life insurance can provide an income tax-free death benefit to help secure your family’s financial security.
When purchasing life insurance, there are two basic initial questions to consider:
"What kind of life insurance do I need?"
"How much life insurance do I need?"
Types of Life Insurance
Most life insurance products can be categorized into two basic groups: term insurance and permanent insurance. You should purchase life insurance that is based on your specific needs and fits within your budget.
What is term insurance?
Term insurance provides coverage for a specific period of time -- normally in increments of 10, 15, 20 or even 30 years. Term insurance is generally less expensive than permanent insurance because most term policies do not contain a cash value component. With term insurance, you pay premiums only for as long as you need insurance coverage.
What is permanent insurance?
Permanent insurance provides coverage for the lifetime of the insured. Generally, permanent insurance is more expensive than term insurance because of the accumulation of cash value within the policy. Cash value accumulation growth is determined by the type of permanent insurance policy purchased. Some of the most common types of permanent insurance include whole life insurance, universal life insurance, and indexed universal life insurance. An important benefit to cash value policies is that the cash value account grows tax-deferred and may be withdrawn or borrowed from the policy*.
How much life insurance do I need?
Each family or business has different needs at the time of a death. While there are several ways of saving for this contingency, life insurance may be the best solution for covering long-term financial needs. Life insurance proceeds may help pay for final expenses or burial costs, replace income, provide a college fund, pay outstanding bills, cover business expenses, or even pay for estate taxes (if applicable).
Applying for Life Insurance
Following the receipt of a life insurance application, most life insurance companies conduct a brief evaluation of the applicant through a process known in the industry as underwriting. National Western Life offers products with both traditional underwriting and simplified underwriting.
Traditional underwriting typically has several requirements including completion of a physical examination by a medical professional. Generally, traditional underwriting is more in depth and may take several weeks to complete.
By contrast, simplified underwriting is based upon the insured’s answers to certain medical questions and shared medical information via the MIB (Medical Information Bureau). Simplified underwriting is designed to take less time than traditional underwriting – perfectly suited for today’s fast paced world.
National Western Life Insurance does not market or solicit life insurance in the state of New York.
*Cash value accumulation may incur additional tax consequences under certain circumstances. Please consult your own tax, accounting, or legal professional before making any decisions. Any outstanding loans or withdrawals may be subtracted from the death benefit.