Kansas Life Insurance | National Life Insurance Day Is May 2

Life insurance can seem complex and mysterious. If you’re in the market for Kansas life insurance, you’ve probably heard a lot of confusing terms, like “term life,” “whole life,” “beneficiary,” and “death benefit.” It’s enough to make you want to forget the whole thing altogether. In honor of National Life Insurance Day on May 2, we’re demystifying life insurance. Read on for:

Answers to common questions about life insurance
An overview of the types of policies available
Definitions of key policy terms
An explanation of how premiums are calculated

Common questions about life insurance

What is life insurance, and why do you need it?

Life insurance protects your family and dependents from financial hardship in case you die. Specifically, it provides money to help with funeral costs, outstanding debts, and day-to-day expenses.

When should you get life insurance?

Consequently, if you have financial responsibilities, you need life insurance. Financial responsibilities include:

A spouse, children, aging parents, or other dependents who rely on your income
A mortgage
A student loan
A business
An auto loan
Credit card debt
Accumulated wealth that could incur a lot of tax when you die

Despite what you would think, life insurance is generally more affordable when you’re young and healthy. If you need life insurance, it’s best to buy a policy now. Kansas life insurance increases as you age, even if you’re in good health. If you get sick after you buy life insurance, your policy rates will stay the same. In this case, don’t wait until you get sick to shop for life insurance. You’ll probably be uninsurable.

How much life insurance do you need?

The amount of life insurance you need depends on what you need it for. For instance, do you have a large business loan? Do you have kids in college? Does your family rely on your income to pay the mortgage? If you need to cover more than just funeral expenses, you’ll need to calculate your base life insurance need. Nonetheless, there are a few ways to do this:

1. Multiply your annual salary by 10 (e.g., $90,000 x 10 = $900,000). This can give you a rough estimate of how much life insurance to buy, but you may need to adjust the number to fit your circumstances. For example, you’ll likely need extra coverage if you have children in daycare.

2. Use the DIME method. Add up your expenses in the following categories to reach your base life insurance need.

Debt +	Income +	Mortgage +	Education
Your personal debts, including credit card balances, business loans, car loans, and student loans	Your annual income times the number of years your family would need financial support	Your mortgage balance and property taxes	The cost of college for each of your children

3. You can also use an online life insurance calculator. These are widely available and will walk you through various inputs to arrive at an accurate number for your circumstances.

Types of life insurance

Term life insurance

Term life insurance covers you for a specific term, such as 10, 20, or 30 years. If you die within the term, your beneficiaries receive the death benefit. If you don’t, your beneficiaries don’t receive any money unless you renew your policy. For this reason, term life insurance is usually cheaper than other types of Kansas life insurance.

Whole life insurance

Whole life insurance provides lifelong coverage. Your beneficiaries get the death benefit, regardless of when you die. It’s considered a type of “permanent” life insurance.

Whole life insurance also builds cash value over time with a guaranteed rate of return. You can borrow against the cash value or withdraw it during your lifetime. For example, you can take a loan against the cash value for a down payment on a house or to pay off a loan. Consequently, this cash value component makes whole life insurance more expensive than term life insurance.

Life insurance loans aren’t taxed as income and don’t affect your credit report. You pay the loan back on your schedule. But remember, if you don’t pay back the loan, the payout value will be reduced.

Universal life insurance

Like whole life insurance, universal life insurance covers you for life. Although, it also builds cash value that can earn interest but with variable rates of return. For this reason, it’s usually cheaper than whole life insurance.

Whereas with universal life insurance, you have the flexibility to adjust your premiums. This can be convenient if you need to lower your premiums. For example, you can opt for a lower premium after you retire and are on a fixed income.

Key policy terms

When looking at Kansas life insurance policies, you’ll need to understand these key terms:

Policy term	Definition
Beneficiary	The person or entity (like a company or trust) you name in your policy to receive the death benefit when you die.
Cash surrender value	The amount of cash available when you voluntarily terminate the policy before it becomes payable.
Cash value	A savings component available in some life insurance policies that grow over time. You can borrow against it or use it during your lifetime.
Contestability period	A period when your insurer has the right to investigate statements on your application and reduce or deny your benefits according to its findings. If they can prove you lied on your application, they’ll deny the policy benefit. The contestability period is usually two years after the date your policy is issued.
Contingent beneficiary	The person who receives the death benefit if your primary beneficiary dies, can’t be located, or refuses the benefit.
Convertible term	A type of term life insurance you can convert to permanent life insurance without evidence of insurability.
Death benefit	The money the life insurance company pays your beneficiary, or beneficiaries, when you die.
Dividend	The portion of a whole life insurance company’s profits that they pay back to you. Some whole life policies pay dividends, while others don’t.
Evidence of insurability	Proof that you’re a reasonable risk for the insurance company to cover. This usually involves providing information about your health and lifestyle and may include a medical exam.
Exclusion	A provision in a life insurance policy that denies coverage for certain events, illnesses, or circumstances. For example, your policy might exclude coverage for suicide or hazardous activities like skydiving.
Face value	The amount your insurance company owes your beneficiary when you die. Note that taking cash value out of a permanent life insurance policy while you’re alive and not paying it back reduces the face value.
Grace period	A period after your premium is due when you can pay without the risk of your coverage being canceled. This is usually 30 days.
Insured	The person whose life the policy covers.
Lapse	When your insurance company terminates your policy due to nonpayment. If your policy lapses, you must pay all unpaid premiums to reinstate your coverage. Check with your insurance company for their rules on lapsed policies.
Living benefit	Allows you to access some of your death benefit while you’re still alive. Living benefits may only be available under certain circumstances, such as when you’re diagnosed with a critical illness. You can add this with a rider.
Policyholder	The owner of the life insurance policy. The policyholder has the legal right to transfer ownership, change payments, and name beneficiaries.
Premium	The amount you pay in exchange for life insurance coverage. Payments could be monthly, annually, or somewhere in between.
Rider	An additional feature or benefit you can add to your policy to customize it to your needs. For example, a “guaranteed insurability rider” lets you add coverage to your policy without evidence of insurability. This can help if you think you’ll want more coverage in the future.
Settlement option	How you or your beneficiaries decide to have the policy benefits paid. For example, your beneficiaries might choose a lump-sum payment or a fixed number of installments until the money runs out.
Underwriting	A process where the insurance company evaluates your risk factors for death and determines an appropriate premium to charge you for the policy based on that risk. For example, skydivers and rock climbers pay higher premiums because they have a higher death risk than the average person.

How your premiums are calculated

Kansas life insurance premiums are based on:

Your policy term if you choose term life insurance
Your desired coverage amount
Factors like your age, gender, health, family medical history, occupational risk, and lifestyle

Insurers gather this information and use actuarial tables, statistics, and calculations to determine your risk. The higher your risk, similarly, the higher your premiums will be.

Questions? We’re here to help

Life insurance can feel overwhelming, but we’re here to help. If you have questions, just ask! We’ll explain your options and help you find the right fit for your needs. Remember, life insurance isn’t for you; it’s for those you leave behind.