Fundamentally, many people don’t fully understand what life insurance is and how it can benefit an individual or a family. Central Lakes Insurance Brokers of Edina, MN are committed to helping MN residents understand what life insurance is and why it’s beneficial. 

What Is Life Insurance?

When you invest in life insurance, you are investing in a policy that will pay a family member or some other beneficiary a monetary amount in the event of your death. As the policyholder, you pay a monthly premium. When you invest in life insurance, you choose a monetary benefit amount that the beneficiary will receive once you die. 

How Does Life Insurance Work?

Life insurance is similar to any insurance in that you pay a monthly premium to an insurance company. If you die while the insurance policy is still active, the insurance company will pay a tax-free sum of money or death benefit.

Term Life vs. Whole Life Insurance

Term life insurance is a life insurance policy that’s purchased for a set number of years. A pre-selected beneficiary receives a death benefit if you die before the term is up. The beneficiary can receive the death benefit as a monthly payment, an annuity, or a lump sum. These types of insurance policies are less expensive than others, and the terms can last as long as thirty years. Conversely, whole life insurance never expires and is active as long as you pay your premiums. In addition to a death benefit, the policyholder also has a cash value. This cash value is represented as a tax-deferred savings account. This savings account is part of your policy. A whole term life insurance policy builds interest at a fixed rate that was determined when you got the policy. As you pay your premiums, some of that money goes towards the cash value of your policy. The cash value of your whole life insurance policy offers a guaranteed rate of return. 

Central Lakes Insurance Brokers in Edina, MN understands how confusing life insurance can be. We are committed to educating our clients and helping them invest in the best life insurance policy to suit their unique needs and situation. Give us a call or visit our office.