Life Insurance: Putting a Premium on Peace of Mind

Think about the issue "Would I leave behind anyone in debt when I pass away?" if this answer is likely "yes." When that's the case, it may be time to shop for life insurance. Life insurance coverage can provide peace of mind, helping you to know that your loved ones or debts will be taken care of in the event of your death. Before you decide whether to buy term or permanent life insurance, you may want to ask yourself whether you qualify and whether you really want life insurance.

Key Takeaways

• Life insurance is important for parents who look at the possibility of their death financially impacting their children. 
• By purchasing life insurance, families can be confident that they'll have funds to live off of if their parents die when the children are dependents.
• Insurance companies also examine your medical history, credit score, driving record, and any hobbies you have to assess the extent to which you engage in reckless pursuits. 
• Your insurance coverage amount depends on the "human life approach" that looks at the life expectancy of the beneficiary or the "needs approach," which focuses on the needs of the client.

Who Needs (and Qualifies for) Life Insurance?

Generally speaking, once a parent becomes a parent, every adult who's living in the house should acquire life insurance that provides protection until the youngest child completes higher education. If you've significant financial obligations, such as high credit card debt or a mortgage, life insurance can be used to keep your debt covered. Many financial planners depend on life-insurance benefits provided by a client to pay for any estate tax due upon the death of a loved one.

To determine if I qualify, most life insurance policies require you to undergo a medical examination before the policy is issued. The company will also check factors such as your medical history, recreation, credit rating, and driving history. A higher age, smoking, and preexisting health issues can also drive up the premium on an insurance policy.

The two primary methods used to calculate the amount of insurance an individual requires are the human life expectancy method and the needs method. First, an individual's income is assessed in terms of their remaining work life expectancy; afterward, the present value of that person's life is calculated using a discount rate. With the needs approach, recurring and unusual expenditures are outlined to figure out the quantity of life insurance necessary.

Term Life Insurance Explained

Term life insurance is pure insurance protection that gives a fastened amount of money in the event that the insured person dies anytime during a set time period. On the death of the insured, term insurance will pay off the face value of this policy to the heir. All payments made are used to cover the cost of insurance protection.

The term of the insurance plan could be one, five, 10, 20, or more decades. However, if it is not renewed, the insurance expires when the term is over. Short-term insurance policies are the cheapest to acquire.

Term life insurance has many key features:

• Temporary insurance protection
• Low cost
• No cash value
• Usually renewable
• Sometimes convertible to permanent life insurance

Term life insurance pays a specified amount if the insured dies during an agreed amount of time, and is considered to be "temporary" insurance, while permanent life insurance guarantees insurance for life as long as the premiums continue to be paid.

Permanent Life Insurance Explained

Permanent life insurance (or cash value insurance) provides permanent life insurance protection (does not expire), but the premiums must be paid on time. Most permanent policies include a savings or investment component along with the insurance coverage. This component of a dissertation, in turn, causes premiums to differ from the funeral insurance policy. It could also offer a fixed interest rate or take the form of money market securities, bonds, or mutual funds. This savings component of this plan allows the policy owner to construct a cash value within the plan which can be borrowed and distributed at some point in the future.

These are the essential characteristics of permanent life insurance:

• Permanent insurance protection
• More expensive to own
• Builds cash value
• Loans are permitted against the policy
• Favorable tax treatment of policy earnings
• Level premiums

There are two basic types of permanent life insurance: whole-life insurance and universal life. The most prominent are whole life and universal life. Whole life insurance provides protection for the rest of your life for which you pay a fee. Cash values usually carry a minimum guaranteed rate of interest and death benefits are a fixed sum of money. Whole life insurance is the most costly type of life insurance.

Universal life insurance separates the cash benefit and death benefit portions. Among the investment options. Over time, you can usually change your premiums and death benefit to fit your current budget.

9 Tips for Those Considering Life Insurance

1. We'll present you with coverage quantities of between $100,000 and $1,000,000 at higher premiums for higher levels of coverage.
2. Ask your insurance company to provide you with a written copy of the policy before you make the switch. Feel free to contact another insurance company if your current provider will not supply you with a written copy of the policy.
3. Make certain that you never shop for a level-premium policy. No one wants to receive a surprise increase in their premium payments. For this reason, before you buy a term or permanent insurance plan be aware of the changes you see in your premium payments.
4. Permanent life insurance as an investment isn't a good deal, even for the money or cash-value feature alone. At least in the early years of your policy, premiums are going to likely be paying the agent's commission anyway. Many policies are not financially sound until their twelfth year, so consider whether the feature is really worth it.
5. Determine the desirable length of your insurance frame before you purchase the appropriate sort of policy. In case you only need insurance for ten years, then you probably ought to buy a term policy. While searching for insurance prices, it's also wise to consider various insurers.
6. Make sure that your insurance carrier has the financial stability to pay a claim in the event of your death.
7. Watch out for fraudsters who pretend to be operators. These fly-by-night operators will offer you terms like accidental death and premium benefits waivers just to boost your premiums.
8. Twenty hours before your examination, restrict sugar and caffeine from your system. It's better to schedule your exam early in the morning and to refrain from drinking anything other than water for at least eight hours before-hand.
9. If your premiums are too high because of your medical conditions or you are denied coverage, check with your employer whether a group plan is available through the company. These group plans don't require a medical exam or physical.

Conclusion

More often than not, the fees charged for high-priced permanent life insurance significantly exceed its benefits. Before jumping the gun and selecting pricey permanent life insurance, be sure to first determine what your needs are for term life insurance. To make sure you're making an informed choice, be sure to look into all of your choices and compare quotes from different companies.

By purchasing life insurance, you are wagering that you will live, but also securing peace of mind in case it does not work out that way. Don't leave your family members alone in the event of a sudden demise, as they are your most valuable widespread.