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It is also hard to know how life insurance will work for you or your loved ones. The worst thing that can happen to you would be an unexpected death of someone close to you – someone that depended on you financially or included you as part of their financial plan. Having Life Insurance Guide
life insurance in place will
give your loved one the security and peace of mind that comes with knowing they are protected from loss of income, medical expenses, and the challenges of everyday living should you die prematurely. This guide will cover all aspects of life insurance, including: What life insurance is; The different types of life insurance; How to apply for life insurance; How much life insurance you need.
What affects the cos
Common mistakes to avoid when choosing the right life insurance policy are:
1. Educating yourself on What is Life Insurance
2. Creating an Insurance Application
3. Understanding Your Age and Health Risk to Underwriting
4. Beginning to Pay Premiums
5. Death Benefit to Your Beneficiary if you die while covered by the policy (this is a very basic definition of Death Benefits) Now, how does
life insurance work
Life insurance is relatively simple.
1. Choose Type and Amount of Coverage
2. Complete Application (Health Information Required)
3. Underwriter Based on Your Age, Health, & Lifestyle
4. Commence to Pay Premiums
5. If you die while Covered by the Policy, your Beneficiary will Receive the Death Benefit. If you don’t pay your premium, the policy will lapse, and will no longer provide coverage.
Why Life Insurance
Life Insurance Is Not Just for Older People.Most people believe life insurance is just for older people. But that’s not true! You Definitely
Need Life Insurance If…
1) You have children who depend on your income,
2) You have a spouse who is financially dependent on you
, 3) You have loans or credit cards or have a mortgage,
4) You want to provide for funeral expenses,
5) You have a business with partners, and 6
) You want to leave a financial legacy behind for future generations.
Life insurance will
be used to help ease these financial burdens for your family if you should die without life insurance.1. Debt Payments,
2. House Payments (rent or mortgage),
3. Education Expenses
, 4. Daily Living Expenses.
Life insurance creates financial stability
for you and your family so your family will experience less emotional stress at that time. Types Of Life InsuranceThere are very different types of life insurance policies and understanding their differences is essential
.1. Term Life Insurance – Provides coverage for a limited term
(i.e. 10 years, 20 years, 30 years). If you die during that period, your beneficiaries will receive the insurance payout. If you are still alive when the term expires, the insurance policy will also expire.
Advantages = Inexpensive premiums, straightforward and easy to understand, provides good coverage for young families. Disadvantages = Loss of coverage once the term expires; premium increases on renewal; options – for those that want inexpensive coverage during years of his/her most significant financial
obligations; you have to be alive when the term expires to receive any money from a life insurance policy).
Whole Life InsuranceWhole life insurance
Provides lifetime benefits and features a savings component with a value that increases over time. Advantages: Lifetime Benefits, Fixed Premiums, Cash Value Accumulation, Ability to Borrow from Cash Value Disadvantages: More Expensive than
Term Life Insurance, More Complicated
to understand, Best suited for people looking for permanent life insurance and long-term financial planning. Universal Life Insurance (UL): UL is a permanent insurance product that has flexibility regarding premium payments and the amount of insurance protection. UL accumulates Cash Value based on
Interest rates. Advantages: Premiums have flexibility; Potential for Cash Accumulation Disadvantages: Must Monitor; Potential for Decrease in Cash Value; Best suited for people who are comfortable with managing flexible financial products.
How Much Life Insurance Do You Need
The standard guideline for purchasing life insurance is to get between 10 and 15 times your yearly salary. For example, if your annual salary is $40,000, it’s recommended that you have at least $400,000 – $600,000 of coverage. In addition to that, these items should be taken into account,**aside from health:** 1.) Outstanding debts.
2.) Mortgages.
3.) Children’s future post-secondary education costs
. 4.) Living expenses for several years.
5.) Funeral expenses. It’s important to make sure that your loved ones will have the same standard of living as they had while you were alive.
Life insurance premiums are affected by the following six factors:
1.) Age – premiums increase as you age.
2.) Health – higher premiums for chronic illnesses.
3.) Smoking – higher premiums for smokers.
4.) Lifestyle – higher premiums for higher-risk jobs/hobbies.
5.) Amount of coverage – higher premiums for greater amounts of coverage
. 6.) Type of insurance – term insurance has less premium expense than permanent insurance.The best time to purchase life insurance is while you are young and healthy.
of Life InsuranceHere are the major advantages:Financial
Advantages of Life Insurance>Replacing lost wages from work >Paying off Debt or Loans >May cover Funeral Related Costs (Burial, Services) >Funds for Children’s Education >Providing Peace of Mind >Providing Help with Estate Planning (May help with transferring wealth)Disadvantages of Life InsuranceEven though
life insurance provides many benefits
there are some disadvantages associated with it:>Long-term Financial Commitment >A greater cost for permanent plans (i.e. whole life or universal life) >Plans can become complex >No return of premium on un-used term plansIt’s important to understand what you are purchasing!When should I purchase life insurance?The best time to purchase life insurance is as soon as possible!Reasons to purchase life insurance as soon as possible includeLower Premium Amounts>
Quicker Approval Process>Better Long-Term SavingsMajor life
changes that signal it is time to buy include:Marriage;Having Kids;Buying a House;Starting a New BusinessCommon Mistakes to Avoid
When Purchasing Life Insurance
Waiting Too Long to Purchase/Getting Too Little Coverage/Not Compaing Companies/Not Understanding Policy & Potential Liability/Not Naming a Beneficiary/Failure to Keep Your Beneficiary info Updated/Failure to Review Policy after Major Life Events
How to Choose the Right Insurance Compan
In order to choose the best insurer possible, you should perform the following: Look at their financial ratings, compare insurance quotes, read customer reviews, understand the terms of your policy and ask
the insurance company about any exclusions. Never choose simply based on the lowest premium. Life Insurance vs. Savings Savings is not the same as life insurance. Savings is money you control. You can take the money out whenever you wish (
subject to any account restrictions, etc
.) and has some limited protection. Life insurance pays a large amount of money directly to your family at your death and you provide protection for your dependents. Some life insurance policies will also provide
a savings option, however, both types of insurance products can easily fit within a comprehensive financial strategy. Frequently Asked Questions (FAQ)What is?
Life insurance mandatory
Life insurance is not required, but it is strongly advised for parents of dependent children. Can I buy coverage if I’m sick? It’s possible, but it will cost you more. Can I cancel
my life insurance policy?
Yes, but you may lose benefits and/or incur cancellation fees. Do at-home moms and dads need
life insurance? Yes, the work at home has monetary value. If I miss a payment, what happens?
The policy might end, but most policies come with a grace period to pay and keep the policy active. Is Life Insurance worth it? For many, yes! If you are the primary wage earner supporting others financially, it will be worth it.
life insurance
Ensures they can:Stay in their home.Continue education.Avoid debt.Maintain stability.The result of all this is that financial security replaces uncertainty.Additional Information
Life Insurance should not be viewed as being a pessimistic
thought process; rather, it is a sensible way to provide for your family by making what could end up being
very large monetary expenditures into smaller, manageable amounts over time. Protecting those you love is among the most important decisions you will ever make and
life insurance should be taken into consideration
as part of your overall financial plan. Consider analyzing your needs, comparing different
life insurance options and then selecting wisely.Therefore, if you are looking for protection from the unexpected, don’t wait until you have a need for a life insurance policy or until it’s too late to protect your loved ones.
In addition, life insurance may also be used
as a way to financially support longer-term objectivese.g., many types
of life insurance policies will accumulate cash value over the course of their existence). The cash value in life insurance
the policy may be available to meet future needs, including funding for retirement, starting a new business opportunity, or obtaining funds in the event of an emergency. Therefore
, life insurance is a tool for providing financial protection, but can also serve as a strategic financial resource.
Above all else, life insurance
is an expression of both love and responsibility towards others. It is a way of ensuring that you will continue to care for your loved ones after you have passed away
. Life insurance offers a legacy of being a loving and responsible parent or spouse.
