Well, today we’ll be sharing with you all that you need to know about life insurance, its types, coverage and how to determine the cost.
So, don’t just stop reading halfway rather continue to the end as we’ve also listed out some important links in the later part of this post which we believe will be of help to you and your loved ones.
Life insurance policy in simple terms is a contract with an insurance company(a registered one).
In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death.
Read: Auto Insurance
Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It’s important to note that death benefits from all types of life insurance are generally income tax-free.
How life insurance can be of help to you
Life insurance can help your family maintain the lifestyle they’ve grown to love and provide longer-lasting financial security. Your family can use it to help pay for funeral expenses, housing costs, medical bills not covered by health insurance, children’s college, debts and just about anything else they may need.
Simply put, life insurance can remove many of your financial worries. Just get a life insurance quote today, check these worries off your list and your family could be better protected.
What is life insurance and how it works
Interestingly, a life insurance policy works similarly to any other type of insurance policy. You determine how much coverage you need, how long you need it and then you make your payments (called premiums).
You typically can choose to pay monthly, annually or quarterly for 10, 20, 30 years or over your lifetime to maintain the coverage.
When you die, if your policy is still active, the people you’ve listed on your policy (called your beneficiaries) get paid the death benefit. In most cases, this payment is paid in one lump sum.
Types of life insurance
Here’re the different types of life insurance you’re expected to get your acquianted with. In this post we’ll only write a little note on them. Maybe in our subsequent posts, we’ll explain the various terms in details.
1. Term life insurance
In a simple terms, term life insurance is designed to provide financial protection for a specific period of time, such as 10 or 20 years. With traditional term insurance, the premium payment amount stays the same for the coverage period you select. After that period, policies may offer continued coverage, usually at a substantially higher premium payment rate.
Term life insurance is generally less expensive than permanent life insurance. This form of life insurance typically gives the most bang for your buck with the most affordable premium payments and a comparable payout.
Term life insurance proceeds can be used to replace lost potential income during working years. This can provide a safety net for your beneficiaries and can also help ensure the family’s financial goals will still be met—goals like paying off a mortgage, keeping a business running, and paying for college.
It’s important to note that, although term life can be used to replace lost potential income, life insurance benefits are paid at one time in a lump sum, not in regular payments like paychecks.
2. Permanent life insurance
Under this type of insurance we have what is known as the universal life insurance and whole life insurance.
Universal life insurance
Universal life insurance is a type of permanent life insurance designed to provide lifetime coverage.
Unlike whole life insurance, universal life insurance policies are flexible and may allow you to raise or lower your premium payment or coverage amounts throughout your lifetime.
Additionally, due to its lifetime coverage, universal life typically has higher premium payments than term. Needs it helps meet: Universal life insurance is most often used as part of a flexible estate planning strategy to help preserve wealth to be transferred to beneficiaries.
Another common use is long term income replacement, where the need extends beyond working years. Some universal life insurance product designs focus on providing both death benefit coverage and building cash value while others focus on providing guaranteed death benefit coverage.
The permanent life insurance gives you a guaranteed payout no matter what age you are or when you pass away, as long as you keep paying your premiums.
Whole life insurance
Whole life insurance is also a type of permanent life insurance designed to provide lifetime coverage. Because of the lifetime coverage period, whole life usually has higher premium payments than term life.
Policy premium payments are typically fixed, and, unlike term, whole life has a cash value, which functions as a savings component and may accumulate tax-deferred over time.
Whole life can be used as an estate planning tool to help preserve the wealth you plan to transfer to your beneficiaries.
3. Final expense insurance
This type of life insurance offers more affordable premium payments and is designed for final expenses, such as medical bills, credit card debt, funeral costs, and others.
How to determine life insurance cost
I guess some of us must have been asking how life insurance rate is deternmine. Well, my answer to this question is that insurers use rate classes, or risk-related categories, to determine your premium payments; these categories don’t, however, affect the length or amount of coverage.
Your rate class is determined by a number of factors, including overall health, family medical history and your lifestyle. A simple example is this: tobacco use would increase risk and therefore cause your premium payment to be higher than that of someone who doesn’t use tobacco.
Life insurance quote
You can get life insurance quotes directly into your mail-box online. All that you need do is to check out the insurance companies that are registered and then signup for their insurance quotes via their official website. When once you do that, you can then start comparing life insurance quotes.