Very Basics of Life Insurance - Life insurance is a policy that you can enter with your insurance company, which promises a certain amount to your beneficiary(ies) in the event of your death. Usually, a spouse will name the other spouse as well as their children as beneficiaries of the policy. As part of the agreement with life insurance, your insurance policy will be a monetary value, that you will in return, pay a monthly premium for. Premiums usually depend on your age, gender, occupation, medical history and other factors.
There are other types of life insurance that may provide benefits for you and for your family while you are still living. These policies can accrue a cash value on a tax-deferred basis and can be used for future needs such as retirement or your child’s education.
|Very Basics of Life Insurance|
Do I Need Life Insurance
Earning an income allows you and your family to do many things. It pays for your mortgage, buys cars, food, clothing, vacations and many other luxuries that you and your family enjoy. However, certain situations can cause you to lose your income, and those who depend on you also depend on your income. If any of the following statements about you and your family are true, then it is probably a good idea for you to consider life insurance.
1) You are married and have a spouse.
2) You have children who are dependent on you.
3) You have a parent or relative who is aging, or disable and depends on you.
4) You have a loved one in your life that you wish to provide for.
5) Your 401K retirement plan, pension and savings aren’t enough to insure your loved one’s future.
What Are My Life Insurance Options
There are four basic types of life insurance that can meet you and your family’s needs:
Term Life Insurance
This is the least expensive type of life insurance coverage, and at least at the beginning, the simplest. Term life insurance policies do not accrue cash value, and are fixed over an extended period of time – usually one to 0 years, and they can be renewed. This life insurance policy pays the beneficiary of your policy a fixed amount in the even that you die in the period of time that your policy includes. The premiums of term life insurance are lowest when you are young and increase as you get older
Whole Life Insurance
This type of life insurance is similar to term life insurance, as well as provides cash value. Over time, whole life insurance generally builds up a cash value on a tax-deferred basis, and some even pay it’s policy holders a dividend. This type of life insurance is popular, doe to the cash value that is accessible to you or your beneficiaries before you die. Used to supplement retirement funds, or to pay for your child’s education, whole life insurance should be used for protection, rather than for accumulation.
Universal Life Insurance
This type of life insurance is a flexible kind of plan. These policies accrue interest and allow the owner to adjust the death benefits and premiums to their current life situation. You decide the amount of premium for universal life insurance, and of you skip a payment, this will be deducted from your death benefit. Universal life insurance stays in effect as long as your cash value can cover the costs of the policy. These rates are subject to change, but they can never fall below the minimum rate that is guaranteed when you sign up for universal life insurance.
Variable Life Insurance
This type of life insurance is designed for people who want to tie the performance of their life insurance policy to that of the financial market. The policy holder gets to decide how the money should be invested, and your cash value has the opportunity to grow more rapidly. However, if the market is poor, your life insurance policy’s death benefit will be poor. As with whole life insurance and universal life insurance, you may withdraw against the cash value. Be reminded that withdrawals of this life insurance policy will be deducted from the cash value.
How Can I Save Money With Life Insurance
Below you will find some suggestions on ways to save money while purchasing the life insurance policy that is right for you.
1) If you don’t need life insurance, don’t buy it. Don’t buy more insurance that you actually need in order to provide financial security for your family.
2) Shop around for competitively-priced life insurance policies while you are healthy. Don’t smoke, or do anything that might increase your rates. Take care of yourself by exercising regularly and maintaining a moderate and healthy weight.
3) If you purchase a term life insurance policy, look for guaranteed and renewable policies. That way you won’t have to periodically continue to shop around for those life insurance policies.
4) You should only buy optional forms of coverage such as riders only if necessary.
5) Shop around and compare life insurance policy rates and coverage. There are thousands of life insurance companies to choose from. It is advised that you get at least three separate quotations of life insurance, and then decide which is the best for you.