Protecting Yourself: Life Insurance Facts You Need To Know
With life insurance, you need to know various facts as it can be very relevant to you and your family. Life insurance can be a very important tool that can be the key to providing your family with a stable financial position in the event of your death.
Before obtaining a policy, there are several decisions to be made. Always research for the best life insurance quotes and coverage from the top insurance companies; in this way, you can get the best life insurance for your situation.
So start shopping around for variations on life insurance in order for you to secure your family’s financial security at the best price.
Life Insurance: Why You Need it and How it Works
One of the first decisions is why you may need it. So why do you need life insurance? First, try to think about of your family’s state in the case of your death. Are you the breadwinner? How will your family pay your debts when you die? Who will pay for your children’s education? How will they pay for funeral expenses? These are problems that your family might face if that situation happens. Would you want that to happen to them? Getting life insurance will definitely help give you peace of mind, especially if your family has a mortgage or if you still have children to send to school. With life insurance, a company can pay your family a tax-free amount upon your death.
Of course, you need to know how life insurance works. Life insurance is a policy or a contract that you take with a life insurance company. You will pay the company a certain premium for periods of time. In exchange for that, the insurance company will pay a certain tax-free amount to your beneficiaries should you die within the period.
Video: Why Should I buy Life Insurance?
It’s important to know that premiums vary and depend largely on the policy holder’s health, age and other demographic factors. For example, people who are obese or who smoke have to pay higher premiums.
To find out how much coverage you need, calculate how much your present debts are and expenses are, such as your mortgage and children’s education. Also be sure to take into account the cost of your family’s current lifestyle. Also check if your spouse has group insurance coverage. This is a fact that you should consider while planning.
Banks also offer creditor life insurance, often bundled with mortgages. It might seem convenient, but purchasing life insurance from banks is rarely recommended. This is because there is no flexibility with mortgage life policies and you cannot choose your own beneficiary. Another problem with this insurance is that underwriting is usually done after the policy is approved. So it’s possible that you could pay high premiums for a policy.
Temporary Life Insurance: Term Life Insurance
You need to know is that there are basically two types of life insurance: permanent and term insurance.
Term life insurance basically provides coverage for a specified amount of time, it is more affordable and preferred by young people. Term life insurance also has limits. It can only provide coverage until a certain age, such as 75 or 80.
Term life insurance is renewable, but premiums keep on increasing with each renewal. Thus, it might be wiser to switch to permanent life insurance later on, especially if you are only using term life insurance to cover a short-term need (e.g. university education).
Life Insurance Through Permanent Life Insurance
Meanwhile, permanent life insurance can provide protection for your entire lifetime. There are three types: term to 100, whole life and universal life.
Term to 100 insurance provides term insurance until you’re 100 years old. This is a good choice if you don’t want the add-ons that come with whole life and universal life insurance.
Whole life insurance also guarantees lifetime coverage. You will pay a fixed premium for a specific policy and can choose to get a participating policy which allows you to receive dividend payments from the company.
Universal life insurance is similar to whole life insurance, but you can choose how much you pay for a certain period of time. For example, for a certain number of years, you can only pay the minimum amount and then pay a higher premium in the five years after. You also choose to use part of the premium on investment options, only unlike with whole life insurance, you can choose where to invest the money in.
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