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Life Insurance

People buy life insurance policies to protect their dependents against financial hardship when the policyholder dies. Many life insurance products also allow policyholders to accumulate savings that can be used in times of financial need. Most American families depend on life insurance to provide their economic protection.

Things You Should Know About Like Insurance

Life insurance proceeds are generally income tax-free.

The proceeds of many permanent life insurance policies can be used to ease the financial burden of catastrophic illness, terminal illness or long-term care.

As the holder of a permanent life insurance policy, you may borrow up to the cash value at an interest rate (fixed or adjustable) stated in the policy. Any unpaid interest is added to the loan. Any unpaid loan, including interest, will be deducted from the death benefit.

In addition to naming a specific beneficiary to receive the proceeds of your life insurance policy (permanent or term), you should name a secondary or “contingent” beneficiary just in case you outlive the first beneficiary.

Types of Insurance

Term Insurance

It provides protection for a specified period of time, typically from one to 30 years. It pays a death benefit only if you die during this term. Some policies can be automatically renewed at the end of the coverage period, and some can be converted to permanent insurance without need for a medical exam.

Permanent Insurance

It provides lifelong protection as long as you continue to pay premiums. The premiums are based on your age at the time of purchase and generally remain level; they do not increase with age.