A life insurance policy represents an agreement between you and an insurance company. You agree to pay a certain amount of money each month (or year) for an agreed-upon length of time. In return, the insurance company agrees to pay out an amount of money to a beneficiary of your choosing if you die before reaching the end date of the contract.
If you are still alive at the end of the contract, you may be able to extend or convert your policy. If not, it will simply lapse.
Permanent life insurance policies — like whole life insurance — last your entire life, as long as you pay your premiums on time and in full.
Buying a life insurance policy typically requires the applicant to answer some questions about their medical history and undergo a basic physical examination. Rates for life insurance policies are determined by a number of factors including age, gender, overall health, tobacco use, lifestyle, policy type and more.
Issuance of the policy may depend upon answers to health questions set forth in the application.
And of course, the amount of life insurance coverage you wish to purchase will factor into the cost of your premiums.
There are a number of reasons to buy life insurance. Here are 9 of the most common reasons for doing so:
There are diﬀerent types of life insurance for diﬀerent needs. The traditional types of life insurance include:
Term life insurance is a type of policy that is put into place for a specified length of time, generally between 10 and 30 years (although shorter terms are also available). If the insured individual dies during that time, the policy payout is made to the beneficiaries. If the insured lives past the policy expiration date, the policy lapses or may be extended at an increased rate.
Whole life insurance is a permanent policy that includes level premiums (which remains valid until the insured individual dies, provided all premium payments are up to date). Whole life insurance includes a cash value that can be accessed while the insured is living.
Universal life insurance is similar to whole life insurance but oﬀers some additional flexibility in regard to the premium payments, death benefits and cash value components of the policy.
Variable life insurance allows the insured individual to take advantage of market-based options within the policy such as equities and mutual funds.
How do life insurance companies make money?
If an insurance company collects $10,000 in premiums from a customer but then has to pay out
$250,000 when that person dies, how could the company possibly make any money?
Life insurance companies take the money collected from premiums and invest it, with the hope of turning it into more than what the policy is worth. There are also customers who outlive their policy (or stop paying their premiums), which means the insurance company does not have to pay out any benefits.
An AIG-appointed life insurance agent can tell you more about how life insurance works
Policies issued by American General Life Insurance Company (AGL). Issuing company AGL is responsible for financial obligations of insurance products and is a member of American International Group, Inc. (AIG). Products may not be available in all states and product features may vary by state. ©2018. All rights reserved.
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Guaranteed acceptance whole life insurance
If you’re age 50-85, you can’t be denied a guaranteed issue whole life insurance policy from AIG Life Insurers for health reasons. Learn more about this type of policy. Benjamin Franklin once noted that there are two certainties in life: death and taxes. But it’s feasible to add guaranteed issue whole life insurance to that short list of guarantees. Guaranteed issue whole life insurance from AIG Life Insurers offers guaranteed acceptance to applicants between the ages of 50 and 85, regardless of health. Coverage is subject to receipt of payment and verification of identity as required by law and is effective upon receipt of policy. Learn more about this type of life insurance policy and find out how it could be the insurance option that is right for you.
Guaranteed Life Insurance: No Health Questions Asked
What if you didn't have to worry about being approved for a life insurance policy? With guaranteed issue life insurance, you don't have to.