What is Life Insurance?

Life insurance is a contract between an insurance policy holder and an insurance company.  The policy holder pays a premium in exchange of benefits from the insurance company upon the death or other events of the insured person.

What are the different types of Life Insurance?

Life insurance includes two types: 

The first type is protection policies designed to provide a benefit in the event of specified events.  Term Insurance is the most common form.

The second type is investment policies.  In addition to provide benefit in the event of specified events, the main objective is to facilitate the capital growth and build cash value of the investment.  Whole Life is a common form in US.

Why do you need it? What are the benefits?

Purchasing life insurance is about more than just planning for the future. It’s about making sure that the people who depend on you will be taken care of, even if you’re not here. But there’s more to whole life insurance than protection. It can help you prepare for retirement,pay for your children’s education, or give you peace of mind as you look forward to tomorrow.

Whole Life Insurance is a type of permanent life insurance protection designed to last a lifetime.  The benefits include:

  1. Death benefit

    While it’s not something people always want to talk about, death benefit protection can give you substantial peace of mind, especially if you have a family, a business, or others who depend on you financially. Your policy’s death benefit can help pay off a mortgage, finance higher education, keep a family business open, or just make life easier for the loved ones you leave behind. You and your agent can decide the death benefit dollar amount best suited to your circumstances.

  2. Cash value

    Cash value is a benefit that is specific to permanent life insurance products like whole life. Your Whole Life policy provides a guaranteed cash value. As you continue to keep your policy, your cash value will grow. You can access your cash value through policy loans. Over time, it can become a valuable asset that you can use any way you see fit, including for some of life’s most pivotal events:

    • Supplementing retirement income as your life insurance needs decrease.

    • Adding to a down payment on a home.

    • Funding the cost of your child’s college education.

    • Financing or starting a new business.

Which product to choose? And Why?

As indicated by previous analysis, Term Insurance only provide protection for a specified time period.  If the insurer is still alive after the period, the insurance company will not be responsible for any event after that and the paid premium will not be returned to the insurer.

However, Whole Life Insurance is an indefinite insurance and will provide lifelong protection until the death of the insurer.  In a simple form, Whole Life Insurance is a combination of protection and investments while Term Insurance is only concentrating on protection in a specified time period.

What do you need to consider when choosing a provider?

There are more than 1800 insurance companies in the US, so it is very important to choose the insurance provider.  Different companies have different reliabilities and attitudes to policy holders.  There is also difference between mutual companies and public listed companies. 

The above information is provided by:

Ariel Chen, New York Life insurance agent, Member of SUNBC

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