Life Insurance

Life Insurance: Providing Financial Protection

Life insurance protects families from the financial loss associated with the death of a wage-earner or family caregiver. It provides critical financial resources to pay for death-related expenses, including medical bills and funeral costs. It also can help families cover daily living expenses, mortgage and tuition payments, child care, outstanding loans, or to continue a family business. There are different types and options to meet a variety of needs.

Life insurance enables individuals and families from all economic brackets to maintain independence in the face of financial catastrophe, helping to relieve pressure on government programs. Two-thirds of American families are protected by life insurance.

The amount of life insurance coverage is determined by the financial needs of individuals and families. Some experts suggest coverage should equal at least seven to 10 times annual income. It is impossible for most families to save enough money on their own to manage the financial consequences associated with the death of a wage-earner or family caregiver. Life insurance makes managing this risk affordable by transferring risk from the individual to the insurer.

By design, permanent life insurance provides lifelong protection as long as premiums are paid. A permanent life insurance policy accumulates a cash value, which helps pay for the rising cost of insurance as one gets older. This cash value can be borrowed against to pay family expenses, such as tuition or long-term care. If an insured’s needs changes and death benefit protection becomes less acute, the policy also can be canceled (surrendered) for cash or converted into a retirement income producing annuity.

Businesses use life insurance to protect against the financial uncertainty associated with the death of an owner or key employee and to fund important employee and retiree benefits.

In 2010, life insurers paid $58 billion to beneficiaries of individual life insurance policies, providing critical financial resources to families.