Life Insurance  How life insurance works At first glance you would think that life insurance would be simple to understand, you die and someone gets some money, but life insurance can be very confusing. There are different kinds of life insurance from "regular" term life insurance to accidental death to what are called cash policies. In life insurance there is the insured person and the beneficiary. The beneficiary is the person who will receive the policie's payout upon the death of the insured. Most life insurance policies are to protect the financial future of the beneficiaries (often a spouse or children) in the event that the insured person dies and can no longer provide for them. The pay out or benefit is usually not taxed in the US unless as part of the inheritance tax. The premium of a life insurance policy can vary depending on all sorts of factors. Some factors include the current health of the insured, age, gender, whether the insured smokes or uses tobacco, and other lifestyle choices of the insured. Life insurance premiums may be paid once a year or monthly. Types of life insurance There are two main types of life insurance: Term Life and Permanent Life. Term life insurance This is the basic type of life insurance. A premium is paid, the insured is covered for a certain amount of time, and the benefit is paid to the beneficiary upon the insured's death. There is no investment factor, just a benefit paid upon death. Permanent life insurance or Cash Value Life Insurance Permanent/cash value insurance is sort of an investment and life insurance combination. The policy builds a cash value over time, but will pay a benefit upon the death of the insured. There are three basic forms of permanent life insurance: Whole Life, Universal Life, and Endowment. Accidental death life insurance is sort of like term, but only pays a benefit if the insured dies from an accident (car crash, fall, etc.) Be sure to read your life insurance policy in detail. Make sure that you have covered what needs to be covered and make sure that any tax issues for your beneficiaries are understood. Life insurance can buy you and your family great peace of mind as well as great protection in the event of the worst happening.

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