Life Insurance

Life insurance is one of the most valuable purchases you'll ever make. Just as we buy car insurance or home insurance to protect us from the consequences of damage to or loss of an asset, we have life insurance to protect against the financial consequences that can result from our own deaths. The loss of income resulting from the death of the family's primary income earner can have compounding effects on financial dependents. For example, surviving dependents may struggle to maintain their former lifestyle, there may not be money to pay for college fees, and outstanding mortgage payments still need to be paid. All of this can create stress and fear on top of the financial pressure faced by the deceased's dependents.

The essence of life insurance is an agreement between the insured person and the insurance provider. The insured person pays premiums to the insurance company, and in return, the insurer will pay out a benefit if the insured person passes away while the policy is active.

For an in-depth look at what life insurance can do for you, check out AIG Direct's guide to the benefits of life insurance.

Who Needs Life Insurance?

Life insurance is something every adult should seriously consider. We can't predict the future, and we have to plan for the unexpected before it happens. We can't afford to wait until tragedy strikes to figure out how to respond, and purchasing life insurance is one tool you can use to secure peace of mind for the future. That doesn't mean that life insurance is a necessity for everyone, just don't dismiss it because you think "I'm too young" or "I'm healthy."

To decide if you need life insurance, you should carefully evaluate your current and future financial circumstances and obligations. Luckily, you don't have to do this alone. AIG Direct's life insurance agents can guide you through this process, helping you to make the best assessment of:

• What financial obligations would you want to be taken care of after your death? This can include settling any outstanding debts but also ensuring that your financial dependents are provided for if you are no longer there to support them with your income
• A timeline for each of these obligations (for example, most people expect to pay off a mortgage long before their death)
• How much money would be required to cover these financial obligations

You'll need to figure out exactly what level of life insurance coverage you may need, as well as how much you'll want your policy to cover. AIG Direct's Term Life Insurance Calculator asks you for a few details then provides an initial picture of what level of coverage you might need. You can then move on and request a quote to find out what your life insurance premium rates could look like, depending on the duration of the policy.

To give you a general idea, you should contemplate purchasing life insurance if you answer "yes" to any of the following questions:

• Do you have an outstanding mortgage on a home?
• Do you have financial dependents? (This could include your spouse or domestic partner, children, or other family members or acquaintances who rely on you for financial support)
• Do you have any other debts which could be passed on to your estate after your death?

How Does Life Insurance Work?

The basic principles of life insurance are quite simple. First, the policyholder and insurance company sign an agreement that lays out the terms of the policy. The agreement will specify certain details like what type of life insurance policy is being provided, the total policy coverage value, the life insurance rate (or premium), and, if applicable, the term length (the duration of the policy). The policyholder then begins paying the insurance company a regular premium, continuing to do so either until the life insurance policy expires or the policy holder's death.

If the policy is still in effect when the policyholder dies, the insurance company pays out the benefits specified according to the policy terms. If the policyholder is still alive when the policy expires, the insurance company does not pay out any benefit.

Remember that there are several types of life insurance. Each type of life insurance has its own advantages, and none is inherently "better" than the others. Which type of life insurance is most suitable for you will depend on your own circumstances and preferences, so explore all the options before committing to one type of policy.

Now that we've covered the basics, if you want to dig a little deeper into how to buy life insurance, explore AIG Direct's resources on choosing a life insurance policy, deciding how much coverage you need, what the application process involves, and much more.

What Type of Life Insurance Do I Need?

There are several types of life insurance, but for most people, the major decision is between two types of life insurance: Term Life Insurance and Permanent Life Insurance, such as Universal Life Insurance. There are good arguments in favor of both types of life insurance, and it's really down to the consumer to determine which type of life insurance is best suited to their needs.

Term Life Insurance provides coverage for a given period of time (the "term"), usually between 10 and 30 years. If the policyholder dies during the term, the insurance company pays a fixed amount to the policy holder's beneficiary. Affordability is one of the biggest selling points of Term Life Insurance, and these policies are also highly customizable for the consumer.

Unlike Term Life Insurance, Permanent Life Insurance has no expiry date. With a Permanent Life Insurance policy, the insurance company pays out a benefit upon the policy holder's death. This type of life insurance also has a cash value that can increase over time and be withdrawn or used to secure a loan before the policy holder's death. As a result, premiums are higher for Permanent Life Insurance policies than for Term Life Insurance.

Continue exploring to learn more about Term Life Insurance, Permanent Life Insurance, and other types of life insurance.

How Much Does Life Insurance Cost?

Life insurance companies take many factors into account in calculating life insurance rates. As discussed above, premiums are generally more expensive for Permanent Life Insurance than for Term Life Insurance. In general, the younger and healthier you are, the lower your premiums will be. Women tend to receive lower life insurance rates than men. Read AIG Direct's guide to life insurance rates for more information and sample rates for various types of life insurance and hypothetical customer demographics.

Applying for Life Insurance

The life insurance application process involves several steps, and it's good to start the journey with a clear idea of what you're getting yourself into. Check out AIG Direct's guide to applying for life insurance to brief yourself on what you can expect when you're ready to make an application.

One of the most important parts of the application process can be the life insurance medical exam. Not only can the medical be a factor in determining what an applicant's premiums will be, but it can also make the difference between an application being approved or denied. Read AIG Direct's guide to the life insurance medical exam to learn what you can expect and how to prepare.

Get a Life Insurance Quote From AIG Direct Today

You should have a much clearer picture now of how a life insurance policy can protect you and your family's future, but it's a lot to think about. Avoid procrastinating over the next steps — instead, speak directly to one of AIG Direct's life insurance agents to ask any questions you have and talk through your options with another human. Call 800-294-4544 to speak to an agent today.