|
| |
Life
Insurance |
| |
|
| |
What
is Life Insurance?
|
| |
What is Life Insurance and a Life
Insurance Company? Can a Life Insurance Company
Help Me? |
| |
|
| |
Find
out below:
Life Insurance
is insurance for you and your family's peace of
mind. Life insurance is a policy that people buy
from a life insurance company, which can be the
basis of protection and financial stability after
one's death. Its function is to help beneficiaries
financially after the owner of the policy dies.
It can also be
a form of savings in the long run if you purchase
a plan, which offers the option of contributing
regularly. Additionally, a little known function
of life insurance is that it can be tied in with
a person's pension plan. A person can make contributions
to a pension that is funded by a life insurance
company. These are considered private pension
arrangements.
In addition,
you should also make a list of what you feel needs
to be protected in your family's way of life.
With a life insurance policy in place, you can:
|
| |
|
| |
 |
provide security
for your family |
|
protect your home mortgage |
|
take care of your estate planning
needs |
|
look at other retirement savings/income
vehicles |
|
| |
|
| |
TYPES OF LIFE INSURANCE |
| |
|
| |
|
| |
Term
life insurance |
| |
Term
life insurance is called "term"
because it provides coverage for a specific period
or term (most often 1, 5, 10, 15 or 20 years).
For this reason, it is also called "temporary"
insurance. If death occurs during the term, the
policy pays cash benefits to the beneficiary.
However, once the term is over, and if the policy
is not renewed, the coverage ceases. If death
occurs after te coverage ceases, no cash benefits
are paid out.
Term insurance is the most straightforward type
of life insurance and the easiest to understand.
Sometimes it is called "pure" insurance,
since the policy has no financial investment value
and most of your premium goes to pay for coverage,
with only a small amount used to pay the insurance
company's costs. If you are looking for the maximum
amount of coverage for your dollar, term life
insurance will give you the most "bang for
your buck".
|
| |
|
| |
Different
Terms for Different Needs. |
| |
|
| |
All
term life insurance policies cover
you for a specific amount of time - the term.
The term that's right for you depends on how old
your children are, how many years before you retire,
and other factors. Many people like to know they're
insured until they're ready to retire, usually
at age 65. Many just want to have insurance until
their youngest child graduates from college, and
so they make sure their life insurance coverage
includes money to pay for all of the college tuition.
Most experts agree that you should carry insurance
at least until your youngest child is 18. So if
your child is 3 now, you would want to carry your
insurance for at least 15 years. But that doesn't
mean you have to lock into a 15-year term - you
could instead buy an annual renewable policy and
renew it for 14 years in a row. You should compare
the total 15-year cost of the annual renewable
policy and the 15-year term policy, making adjustments
for the time and value of money, to determine
what the best value is for you.
|
| |
|
| |
Advantages
Of Term Life Insurance: WHAT IT DOES |
| |
|
It pays a death
benefit to the beneficiary you name. |
|
It will cover your final expenses
and provide a lump sum for your dependents.
|
|
It covers you for the full amount
of life insurance you choose. |
|
It can be convertible and renewable
depending on the policy. |
|
It gradually increases annual
premium as you get older. |
|
It traditionally works well
to meet temporary insurance needs. |
|
| |
|
| |
Whole
Life Insurance |
| |
As
the name implies, whole life insurance covers
the policyholder for his or her whole life. There
is no fixed end date for the policy, as there
is with term life insurance. When the policy holder
dies, the face value of the policy, known as a
death benefit, is paid to the person or persons
named in the life insurance policy (the beneficiary
or beneficiaries).
The cost of a whole life insurance policy is spread
out across many years, so the premium remains
the same. This ensures that older people on a
fixed income will not have to cope with rising
premiums.
Unlike term life insurance, whole life insurance
accrues cash value over time. If you cancel the
policy after a certain amount of time has passed,
the insurance company will surrender the cash
value to you. The cash value is scheduled to equal
the face value when the policyholder reaches the
age of 100. If you live that long, the insurance
company will likely pay the face value to you
in a lump sum.
This is not the only way to use the cash value,
however. You can also borrow some of the cash
value as a loan. The money has to be paid back,
but there is no approval process and no risk of
being turned down. You are your own lender. Some
whole life insurance pays dividends, so it can
be used to supplement your retirement income.
|
| |
|
| |
Universal
Life Insurance |
| |
Universal
life insurance offers many features of whole life
insurance, but allows greater flexibility once
the policy is in force. Like whole life insurance,
universal life insurance is a permanent policy.
It protects the policyholder until death—however
long that may be. Also like whole life insurance,
universal life insurance accrues cash value over
time.
Unlike whole life insurance, universal life insurance
breaks the death benefit and cash value accumulation
into separate components. This allows the policy
holder to make changes in the policy. For example,
if the policyholder wants to increase the death
benefit, he or she puts more of the premium money
into the insurance account and less into the cash
value account. The reverse is also true. The policyholder
can decrease the death benefit and increase the
cash value contribution. To reduce premiums, the
policyholder can pay only the insurance portion.
Once the cash value has accumulated, the policyholder
can withdraw the money. The money must be paid
back, or else the death benefit will be decreased.
Some people use the universal life insurance policy
as a savings account to draw on as they get older.
Others use the accumulating cash value to increase
the death benefit so they have more to leave their
loved ones. Universal life allows these choices
and decisions to be made throughout your lifetime.
|
| |
|
| |
Children's
Life Insurance - Life Insurance for Kids |
| |
Parents
and grandparents want the best for the little
loved ones in their lives—from keeping them
healthy and happy to providing for their financial
future.
Children’s life insurance is a tool many
families use to give their children a financial
foundation that they can draw upon when they are
older.
The lowest cost life insurance you can buy is
the one you qualify for right now: Rates rise
with age. It comes as no surprise, then, that
rates for a child—as young as two weeks
old—is the least expensive insurance you
can buy. The low rates make whole life insurance
affordable for almost everyone. Because whole
life premiums are locked in at the beginning,
they will never increase with the child’s
age—regardless of whatever health issues
may arise.
Whole life insurance has the added advantage of
accumulating cash value over time. This cash value
is a financial asset that the grown child can
borrow against or use as collateral. In addition,
the money borrowed is not subject to income tax,
whether or not the loan amount is repaid.
By the time the child turns twenty, the cash value
of a whole life policy will likely be equal to
or greater than the amount of the premiums paid.
If you paid $10 a month for a $15,000 policy,
after 20 years the policy would have a cash value
of $2,400 or more. A $35,000 policy would have
a cash value of about $5,700. Some life insurance
programs provide for an automatic doubling of
the policy’s face value when the child turns
21—without a change in the premium. In addition,
you or the adult child may be able to purchase
additional coverage on certain policy anniversary
dates, also without increasing the premium.
The primary reason for buying any kind of life
insurance is to insure against untimely death.
This is not something parents or grandparents
wish to think about. Nevertheless, consideration
must be given to the survivors, including a child’s
siblings. Funeral and burial expenses and unpaid
medical bills can affect the finances of an entire
family at a time when grief and stress are already
at an extreme level. Life insurance is a way of
protecting everyone.
|
| |
|
| |
Senior
Life Insurance - Life Insurance for Elders |
| |
No
one wants to be a burden to their spouse and children
— in life or even in death. This is the
main reason why seniors often take a second look
at life insurance.
Most seniors already
have life insurance of some kind, but the death
benefit often is too small to take care of funeral
expenses and medical bills. In most states, a
life insurance death benefit is exempt from creditors.
It is also exempt from inheritance taxes. This
makes it an excellent vehicle to transfer wealth
to survivors.
Seniors often assume that they will not qualify
for life insurance, but many states have laws
requiring insurance companies to provide coverage
to seniors. Since the senior population is growing
fast, many insurance companies have found it profitable
to offer life insurance to seniors.
|
| |
|
| |
Guaranteed
Acceptance Life Insurance.
The best premium rates are offered to seniors
who pass a health exam, but many companies offer
insurance with no exam required. Typically these
policies, known as Guaranteed Acceptance Life
Insurance (usually a type of whole life insurance
or universal life insurance) will pay a full death
benefit in the case of accidental death as soon
as the policy goes into effect. However, the policy
will pay a limited death benefit if the policyholder
dies of natural causes during the first two years
of the policy. The insurance companies place these
limits on the policies to avoid writing “deathbed”
policies. The limited death benefit normally consists
of the premiums paid plus interest. Once the two-year
waiting period is over, the policy holder is fully
insured.
Term Life Insurance
for Seniors.
Many seniors, especially those on fixed incomes,
do not look at life insurance as an investment
opportunity. They are more interested in easing
the burden of their death on their survivors.
In these cases, term life insurance may be the
best option.
Whole Life Insurance
for Seniors.
Thanks to improvements in diet and healthcare,
seniors are living longer than ever. As a result,
there is a risk of outliving your term life insurance
policy. Whole life insurance will cover you for
your whole life, no matter how long that may be.
The premium is fixed for the life of the policy.
It cannot go up. The policy will build cash value.
You can borrow that money or passed it on tax-free
to your heirs. Whole life premiums can be much
higher than term life premiums.
Single-pay Insurance.
If you have accumulated considerable wealth and
are not planning to use it for living expenses,
you might consider a single-pay insurance policy.
This will allow you to “leverage”
your money for your heirs. A $100,000 policy paid
for with a single premium can double or triple
in value overnight, and the death benefit can
be structured to be paid tax-free.
As with any insurance, your goals should dictate
the kind of insurance you buy. Consult with an
insurance professional before deciding which option
is right for you. |
| |
|
| |
Mortgage
Protection Life Insurance - A Home Saver
|
| |
Life
Insurance to cover your mortgage can save your
home.
Mortgage
protection life insurance can be a lifesaver—not
for the mortgage protection life insurance policyholder,
of course, but for the mortgage protection life
insurance policyholder’s family. Mortgage
protection life insurance eliminates the risk
of your family losing its home in the event that
you die before your home mortgage is paid off.
Financial health
during a terminal illness
Mortgage protection life insurance can also protect
your home in the event that you are diagnosed
with a terminal illness. Mortgage protection life
insurance policies can be written to include a
terminal illness benefit. The terminal illness
benefit will pay off the mortgage while the mortgage
protection life insurance policyholder is still
alive.
The terminal illness benefit eliminates the burden
of making monthly mortgage payments when the mortgage
protection life insurance policyholder is no longer
able to work or earn money due to the terminal
illness. The peace of mind provided by mortgage
protection life insurance can be a great comfort
to a terminally ill patient. It allows the mortgage
protection life insurance policyholder to rest
easy, knowing that he or she has left the family
a home that they own free and clear. It is a final
gift to loved ones—a legacy of love and
financial foresight that the mortgage protection
life insurance policyholder can take great comfort
in as his or her end approaches.
A mortgage protection life insurance terminal
illness benefit also relieves stress on the terminally
ill person’s family at a time when they
have a great deal on their mind. Caring for a
terminally ill family member and preparing for
a future without him or her is one of the most
stressful situations a family can face and doing
so while struggling to save the family home can
be overwhelming. A mortgage protection life insurance
policy eliminates the worry of where the money
will come from to make mortgage payments.
A financial control
Some people question that wisdom of mortgage protection
life insurance because it limits a family’s
options after the death of the mortgage protection
life insurance policyholder. It is true that options
are limited, but this is a major benefit of mortgage
protection life insurance. A mortgage protection
life insurance policy serves as a kind of financial
control.
A standard life insurance benefit could be used
to pay off a mortgage, but it also could be used
for other purposes. Beneficiaries might choose
to invest the death benefit, believing the return
on the investment would be greater than the interest
paid on home loan. The return on the types of
investments that would outperform, say, a 5-7
percent mortgage interest rate cannot be guaranteed.
In addition, grieving family members often do
not make the best investment decisions. Add to
the mix the fact that unscrupulous financial advisors
may attempt to take advantage of grieving family
members, and you have a recipe for financial disaster.
The family may lose the life insurance death benefit
and have nothing left to repay the mortgage.
Mortgage protection life insurance guarantees
that the family will have a roof over its head
no matter what financial decisions grieving family
members make. Mortgage protection life insurance
allows the policyholder to extend his or her decision-making
power after death. He or she will enjoy the peace
of mind of knowing for years—and even decades—prior
to death that his or her death benefit will be
used to secure a home for the family. The family’s
largest asset will not fall prey to bad judgment
or financial predators.
|
| |
|
| |
|
|
