Life Insurance Basics - FAQs
You need life insurance to keep you and your family prepared for the unexpected. Your financial priorities probably include things like protecting your mortgage, preserving your income, funding a child's education, minimizing debt and staying ahead of everyday living expenses.
If your family was suddenly without income, it would have a dramatic impact on the financial well-being of the people you care about most. The money you earn helps put food on the table, meet day-to-day expenses and plan for the future of your loved ones. Without it, your family may not be able to maintain their standard of living – so it's important to protect it.
- Term life insurance provides protection for a specific, limited amount of time – usually 10, 15, 20, 25 or 30 years. Level term provides death benefit protection and features rates and coverage amounts that stay the same for the term of the policy.
- Whole life insurance provides protection for an individual's entire lifetime, as long as premiums continue to be paid.
Financial planners often suggest a life insurance amount equal to seven to 10 times your annual income. However, this is just a rule of thumb, and many other factors should be considered before determining the amount of life insurance you need. Use our free Needs Calculator to help determine the approximate amount of life insurance you may need to help protect your family.
The annual increase in a policy's cash value is not taxable, as long as the funds remain in the policy. However, if the cash value is withdrawn, any excess received over premiums paid may be taxable.
Typically, life insurance death proceeds will not be subject to income taxation for the beneficiary.
There are some limited and unique circumstances when a death benefit may be subject to an estate or inheritance tax.
You should consult with your tax advisor if you have any questions.
You’ll need information regarding the manner and cause of death, and a certified copy of the death certificate. In some instances, we may need to obtain medical history information, including doctors’ names and medical treatments. An Amica representative is always available to assist and make this process as easy as possible.