Paul Sanchez
Prudential offers a range of life insurance policies to help protect your loved ones and give you peace of mind. Life insurance can help replace income, create inheritances, support charities, and more. There are two main types of life insurance: term, which covers you for a set period, and permanent, which may cover you for the rest of your life. Term life insurance is the most cost-effective way to provide a death benefit for your family for a set number of years. You can choose your own term length, typically from 10 to 30 years, and pay a set premium for the duration. If you are unsure about which type of life insurance is right for you, Prudential offers resources and financial professionals to help you decide.
| Characteristics | Values |
|---|---|
| Type | Term life insurance, Permanent life insurance |
| Coverage | Variable, depends on age, health, lifestyle, etc. |
| Cost | Variable, depends on coverage, age, health, lifestyle, etc. |
| Payment | Regular payments (premiums) |
| Lump Sum | Paid to beneficiaries upon death |
| Riders | Optional benefits, e.g., chronic illness coverage |
| Living Benefits | Accessible while the insured is alive |
| Exclusions | Policies contain exclusions, limitations, and reductions |
| Provider | The Prudential Insurance Company of America, Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey |
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What You'll Learn
How much life insurance do I need?
The amount of life insurance you need depends on your personal circumstances and financial goals. It's important to consider your savings, debts, income, and family situation when determining the appropriate coverage amount. Here are some factors to consider when deciding how much life insurance you need:
Income Replacement
One of the primary purposes of life insurance is to replace lost income in the event of your death. You can calculate the necessary coverage by multiplying your annual income by the number of years your family will need financial support. For example, if you earn $50,000 per year and want to provide for your family for 10 years, you would need a policy worth $500,000.
Debt and Final Expenses
Consider any debts you may leave behind, such as credit card debt, student loans, or personal obligations. Additionally, include an estimate of your funeral and final expenses, which can average around $7,000.
Mortgage Payments
If you have a mortgage, calculate the remaining amount you need to pay it off. This will ensure that your loved ones can continue living in the home without the burden of mortgage payments.
Education Costs
If you have children, you may want to include the anticipated cost of their college education. It is recommended to plan for between $100,000 and $150,000 per child.
Existing Life Insurance and Savings
Don't forget to subtract any existing life insurance policies and savings that your family can use to pay expenses. This includes retirement savings, college funds, and any other financial assets.
While it's challenging to determine the exact amount of life insurance you need down to the penny, you can use online calculators and consult financial professionals to make a well-informed decision. Prudential Financial offers competitively priced term life insurance policies with optional benefits to tailor the coverage to your specific needs.
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What is term life insurance?
Term life insurance is a type of life insurance that provides coverage at a fixed rate of payments for a specific period of time, known as the "term". The term of the policy can vary, with basic term life insurance lengths being 10, 20, or 30 years. The policyholder can also choose a term length that suits their unique lifestyle and needs. The longer the term, the more the policyholder will typically pay each month for a given coverage amount.
Term life insurance is a popular choice for those looking to save money upfront, as it is usually much less expensive than permanent life insurance, depending on the length of the term. It is also a pure death benefit, meaning its primary use is to provide coverage of financial responsibilities for the insured or their beneficiaries. These responsibilities may include consumer debt, dependent care, university education for dependents, funeral costs, and mortgages.
There are several types of term life insurance policies, including:
- Level premium (or level term): The simplest and most common type of policy, where the premium stays the same for the entire term.
- Yearly renewable term (or annual renewable term): This policy covers the policyholder for a year at a time, with the option to renew without a medical exam for the duration of the term, but at a higher cost each year.
- Return of premium: This type of policy pays back all or a portion of the premiums if the policyholder lives to the end of the term.
- Fixed term: The most popular choice, which lasts 10, 20, or 30 years with static premiums.
- Increasing term: This policy allows the policyholder to scale up the value of their death benefit over time, resulting in slightly higher premiums.
- Decreasing term: This policy reduces the premium payments over time, which can result in a smaller death benefit.
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What are the benefits of permanent life insurance?
Permanent life insurance offers lifelong coverage and is a good option for anyone who wants to ensure their loved ones are financially protected in the event of their death. It is especially beneficial for those with young children, as it can provide financial stability to support children's education and living expenses if a parent passes away.
Permanent life insurance policies also have a cash value component, which can be used by the policyholder in several ways. This cash value grows over time and can be used to create an income stream for supplemental retirement income or to borrow against for low-interest loans. The cash value can also be used to pay premiums or surrendered for cash to fund retirement. This cash value grows on a tax-deferred basis, meaning policyholders won't have to pay taxes on the gains until they make a withdrawal.
Another advantage of permanent life insurance is the flexibility it offers. It typically offers more riders and customization options to cater to a lifetime of different possibilities. For example, a "waiver of premium" rider will pay your premium if you become disabled and unable to work, allowing you to keep your policy active. An "accelerated benefit" rider provides the option to access a portion of the death benefit while you are still alive if you become terminally ill or chronically ill.
Permanent life insurance also provides peace of mind, knowing that your loved ones will be protected financially, and it can help build your financial confidence. It is a good option for those who may not be disciplined about saving money on their own, as it helps build savings through the premiums.
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How do I choose a beneficiary?
Choosing a beneficiary is a critical aspect of estate planning. A beneficiary is a person or entity (e.g. a trust) who will receive the proceeds of your life insurance policy or other assets upon your death. It is important to name a beneficiary to ensure your wishes are carried out and to avoid any potential issues for your heirs.
When choosing a beneficiary, you should first decide who you want to inherit your assets. You can name more than one beneficiary and allocate what portion of your account should go to each. Basic information about each beneficiary, such as their name, address, and Social Security number, will be required. For trusts or organizations, a tax ID is usually sufficient.
You can name beneficiaries for various assets, including life insurance policies, retirement accounts, and checking and savings accounts. Additionally, depending on your state, you may be able to name beneficiaries for other assets like your car title or house deed through a "transfer-on-death" or "beneficiary deed." It is important to review and update your beneficiary designations periodically, especially after significant life events such as marriage, divorce, or a change in your family situation.
To change your beneficiary information for a Prudential life insurance policy, you can access "Change Beneficiary(ies)" from your Policy Profile page or select the "Request to Change Beneficiary on Life Insurance" form from the "Forms Library." Alternatively, you can contact Prudential's Customer Service Center for assistance. You can also change your beneficiary designation by logging into your account and accessing the self-service options.
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How much does life insurance cost?
The cost of life insurance is dependent on several factors. Firstly, it is important to note that life insurance policies are underwritten, meaning that the cost is based on the estimated mortality rate of the insured. This takes into account age and health factors, with younger and healthier individuals generally paying less for their life insurance policy. Additionally, the type of premium, whether it is non-flexible or flexible, can impact the cost of the policy. Non-flexible premiums are a specific amount paid at a set frequency, such as monthly or annually, while flexible premiums can be paid in varying amounts at different times.
Certain behaviours and lifestyle choices can also influence the cost of life insurance. For example, tobacco use, driving violations, risky hobbies, and occupations are considered risk factors by insurance companies and can lead to higher premiums. On the other hand, maintaining a healthy weight and managing pre-existing conditions can help keep premiums lower.
The cost of life insurance can also vary depending on the type of policy chosen. Term life insurance, offered by Prudential, provides coverage for a specific period and can include optional benefits, known as riders, to customise the policy to the individual's needs. This type of insurance is competitively priced and offers flexibility in adding benefits to address specific concerns, such as chronic illness coverage.
It is important to consult with a financial professional to understand the complete details and costs of a life insurance policy. They can provide expertise and guidance on the various exclusions, limitations, and benefits associated with different policies, ensuring that individuals make informed decisions about their coverage.
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Frequently asked questions
Life insurance is a policy that provides money for loved ones when you die. It can also help build financial confidence, protect your income, and support your family.
There are two main types of life insurance: term life insurance and permanent life insurance. Term life insurance covers you for a specific period, while permanent life insurance may cover you for the rest of your life.
The cost of life insurance depends on various factors such as age, health, weight, height, nicotine and tobacco use, driving record, coverage amount, and length. Generally, the younger and healthier you are, the lower the cost.
Life insurance coverage typically includes a death benefit, which is a lump sum payment made to the beneficiary upon the insured's death. It can be used to cover funeral costs, pay off debt, or support the beneficiary's financial needs. Some policies also offer living benefits, such as chronic illness coverage or disability benefits.
The type of life insurance that is right for you depends on your individual needs and circumstances. Consider factors such as your age, health, financial obligations, and long-term goals when deciding between term and permanent life insurance.
