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Life insurance, simply put, is a contract between the policy holder and an insurance company that protects you from financial loss in the event of the policy owner’s death. Upon the event of death, the policy holder’s beneficiaries are paid a prearranged amount of money by the insurance agency. Life insurance affords the policy holder peace of mind, knowing that their family is covered financially in the event of their death.

In general, there are two types of life insurance: term life and cash value life. Some policies are a combination of both of these types. It is very important that you understand the difference between these types of insurance in order to be sure you get the best type of coverage for your needs.

Term Life insurance pays the beneficiaries a prearranged sum of cash upon the death of the policy holder, as long as it is within the coverage period. This type of policy does not acquire any additional value during the life of the policy.

Cash value life insurance is more beneficial, and as a result more expensive. Cash value life insurance is different in that it gains additional value as the policy ages. The policy holder has the option to withdraw, invest, or borrow against the value of this type of policy, which gives the policy holder more flexibility than a term life policy.

The amount of coverage needed varies from person to person. Choosing the right type of coverage can depend on how many beneficiaries need to be covered, the financial situation of the policy holder, and the number of years the policy covers. A common rule of thumb is to cover six to eight times the annual gross salary of the policy holder, not counting unearned income and investments. Understanding the existence of the dependents and the degree of their dependency is the key to realizing the correct amount of coverage needed.

It is important not to consider life insurance as an investment. The right life insurance coverage is crucial to ensure your family’s financial security in guaranteed in the event of your death. It is important to understand every available option to you, and speaking with a qualified insurance agent is a great way to do that. LowIowaRates.com provides a comprehensive life insurance referral network that makes it simple to get in touch with the right insurance agent or broker for you. Our customers from Des Moines, Cedar Rapids, Davenport, Sioux City, Waterloo, Iowa City, Council Bluffs, Dubuque, Ames, and many other great cities in America’s Heartland use our services daily to find and compare rates from the top rated insurance companies.