In this article we will discuss the broad type of life insurance policies. But first lets set the stage by understanding the need for life insurance.
Why Take Life Insurance Policy?
In today’s economy, many people believe that investing in life insurance policies is not useful. Many individuals believe that the costs involved in taking a life insurance policy outweigh the potential peace of mind that such a policy has the chance to bring.
For this reason, it’s important to understand the benefits of life insurance policies and to look at such plans as opportunities to protect your beloved from financial distress instead of yet another cost incurred or bill to pay. The death part isn’t easy to talk about with loved ones. It’s even awkward to read about it or to even get help choosing the right policy on a Web site. But here’s a thought: when you’ve taken care of your loved ones in the event of your death, you don’t think about it. You can think about getting the most out of life. You may not like to think about it, but what would happen to your family if you were no longer around? This question goes far beyond simple questions like, “Who would take out the trash?” Life insurance addresses the deeper, long-term practicalities such as:
- Would your family be able to make ends meet?
- Would their future plans for an education or retirement fall apart?
- Would they be able to stay in their home?
- A life insurance policy is a way to ensure your family some financial stability in the event of your death.
Your Employer Provides Life Insurance. But is It Enough?
The life insurance policy provided by your employer may not be enough for your needs. It may be just enough to cover funeral expenses or equivalent to one year’s income. Or you may not be covered if you’re self-employed or you lose your job. Life insurance can add valuable support to the insurance you already have or it can replace it entirely.
First and foremost, life insurance policies allow you to financially protect your family and your loved ones. In the event of your untimely passing, life insurance functions to monetarily aid your family through otherwise difficult times. As your family deals with the grief of a loved one lost, they will be able to find some solace in knowing that immediate expenses are covered and that they can spend this time focusing on you and your legacy. In addition to immediate expenses, your life insurance policy can be put toward your children’s continuing education. Your children should be able to rest comfortably, knowing that they do have a future and that their lives will continue.
How Much Life Insurance Do I Need?
The amount of life insurance you need will depend on your earning capacity, your living style, your liabilities towards your family, situation & circumstances and on your family’s financial goals. It also depends on at what stage if life you are in. Life insurance comes in many different amounts and can be purchased for various lengths of time, or terms. You can use a calculator to help you determine how much life insurance you need.
How Much Does Life Insurance Cost?
Your premium, the amount you will pay to keep the policy in effect, will depend on many different factors, including the amount of the policy, the length of the term of the policy, your age, your height, your gender, your health as well as on other information about you and your lifestyle. You can choose different payment plans and options for your premiums as well as for your benefits.
Two Most Prominent Life Insurance Policies
The two most prominent types of life insurance policies are Term Life Insurance and Whole Life Insurance. Each has its own advantages.
Term Life Insurance
This type of life insurance represents the opportunity to purchase life insurance for specific, designated periods of time. Your coverage depends upon your needs during a certain time period. Because you can specify the period of time for which you’d like to receive coverage, you can change and adjust your policy at the end of each term. In doing so, you reward yourself with lower premiums. Newlyweds and those raising small children generally opt to invest in term life in order to have some extra insurance during the more hectic, formative years.
By nature, term life insurance is meant to act as a temporary option. In the event of your untimely passing, your policy will be paid out directly to your beneficiary should you pass away during the term of your policy? Term life insurance offers a number of benefits that serve to make your life, in the present, much calmer and easier. This type of insurance is purchased for specified periods of time. Therefore it is a more affordable option for many people.
Because it’s generally rather inexpensive for younger individuals, it’s an appealing alternative for couples are just beginning their families. Further, with Term Life Insurance, you generally have the opportunity to obtain a fixed rate for periods of 5 years lasting between 5 and 30 years. In addition to this advantage a fixed rate can help you and your family to save money while still receiving the life coverage that you need and deserve.
When You Might Need Term Life Insurance?
When Single-You may not be responsible for someone else, but your debts don’t necessarily die with you. So it’s nice to cover those debts and the expense of a funeral for your closest relatives.
When Responsible for Others-Term life insurance meets the first responsibility of providing for your loved ones—whether you share expenses with a spouse or you’re responsible for dependents such as children or even elderly parents.
When On a Tight Budget-If you’re young or just starting a family, you may not yet have the income for permanent life insurance. There are several cost-effective term policies that guarantee level premiums for a number of years.
When You Have a Temporary Need-Given your circumstances, you may not have a need for the long-term nature of permanent life insurance. In that case, a term life insurance policy may be ideal for you.
Whole Life Insurance
In regard to Whole Life Insurance, there are a variety of living benefits to consider. While it initially comes at a higher cost than term life insurance, the payouts can be quite significant. When you invest in a whole life insurance policy, not only are your premium costs guaranteed, but you also continue to build cash value.
Further, this cash value is generally protected from creditors and similar parties that may be after your money. If you become terminally ill or disabled, then your insurance company will cover the costs of your premium payments until you regain your health. Whole life insurance offers a host of benefits – it’s just a matter of determining whether or not this type of policy reflects the needs of you and your family.
When you purchase a whole life insurance policy, your policy accumulates and builds cash value. This cash value can be put toward additional expenses including educational finances and mortgage payments, as well as other temporary fees that require immediate attention.
Unlike term life insurance, if the insured passes away, then the policy will be paid out in full to the beneficiaries. Additionally, while term life insurance premiums may vary, whole life insurance premiums often remain constant. This can work to your benefit, if term life premiums appear to be constantly increasing. Further, because whole life insurance accrues cash value throughout the life of the policy, you can expect to leave your loved ones with a healthy sum of money that can help them to properly prepare for the future.
Why Some Individuals Are Considered High Risk?
Life insurance is not something that is simple or cheap for everyone to get. Term Life Insurance companies view certain individuals as being high risk due to a variety of factors. Some of these factors involve their lifestyle, others involve pre-existing conditions, which are likely to become a monetary burden, and others yet are based on familial medical history.
If you are overweight, smoke cigarettes, drink alcohol regularly or are or ever have been a drug user, you are considered to have aspects of your lifestyle that will lead to illness and potentially an early death. Insurance companies of this fashion make their money by people paying their monthly premium until they die. If a company has to give an early payout due to a premature death, this is detrimental to them.
Another way that people are categorized as high risk is by having prior health issues. A cancer patient who has gone into remission and recovered is still a high risk individual according to a life insurance company because of the potential of relapse. If an individual has a condition such as diabetes, terminal cancer, HIV or any of a series of autoimmune disorders, they are considered to be high risk because there is a far greater likelihood that they will die from that condition than naturally of old age.
Familial medical history can also label an individual as a high-risk client. If mothers, fathers, grandparents, aunts, uncles, brothers, sisters or children have suffered from a major medical condition that can be considered to have a genetic predisposition, an individual becomes high risk because of the likelihood of that condition inevitably presenting itself in the individual as well.
Categorizing individuals as high risk allows term life insurance companies to determine who can start a policy and how much it will cost. While it is unfortunate for people who are designated as high-risk individuals, the high-risk designation is a matter of financial practicality for the company.
Whether you believe it is Term Life Insurance Policy or Whole Life Insurance Policy that will more effectively suit the needs of you and your family, it’s important to invest in some type of insurance. The security benefits alone will provide peace of mind for you and your family should the unthinkable happen.