SELECT YOUR LANGUAGE

Life insurance is not something that many people have.  However, it is an extremely beneficial resource that can help you and your loved ones financially upon death, or based upon the type of insurance policy that you have (living benefits or death benefits).  Let’s educate ourselves about life insurance policies, before we think that we don’t need one.

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What is a Life Insurance policy?
 

Life insurance is a contract between an insurance company (policy holder) and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon death of an insured person, while the policy is active.  There are different types of life insurance policies, term and whole (permanent) life insurance.  The term you choose depends upon how much you want to pay and how long you want the policy to last.

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Term Life insurance covers you for a set period of time, such as ten or twenty years.  Policy amounts range from thousands to millions.  The cost of term life insurance is often lower than whole coverage.  Depending upon the policy, you might be able to review your coverage or convert it to a permanent policy when it expires.

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Whole (permanent) life insurance covers you for your entire life and has a cash value savings account that you can withdraw or borrow against.  For those reasons, a whole life insurance policy is more expensive than term life insurance.
 

Universal life insurance is a type of permanent coverage with more flexibility than whole life.  You can increase your premium to boost the policy's cash value or decrease it if the cash value can cover the difference.  You can also raise or lower the coverage amount if your insurance needs change.  A medical examination could be required to increase coverage. 

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When purchasing life insurance, you will need to designate one or more beneficiaries (who you want to receive the death benefit from your policy when you die). Typically, you would choose a primary beneficiary and a contingent beneficiary (the person who would receive the benefits from your life insurance policy, if the primary beneficiary passed away).  Death benefits are not paid out automatically.  The beneficiary must file a claim with the life insurance company and provide supporting evidence (death certificate) before the claim can be processed.

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Life insurance premiums are calculated based on your life expectancy, which equates to how likely it is the insurer will have to pay out a claim.  To estimate your life expectancy, insurers can use  personal information such as your age, health and family medical history.  A medical exam is not always required to get a life insurance policy.  Just make sure that you compare life insurance quotes before selecting a policy. 

 

There are different ways a beneficiary may receive a life insurance payout, including lump-sum payments, installment payments, annuities, and retained asset accounts.  Some life insurance policies can offer both death and living benefits.  Living benefits allow you to “tap” into your policy’s death benefit while you are still alive, which could be beneficial if you need it to cover medical treatment expenses.

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Why is life insurance important?

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A life insurance policy can provide financial security to your beneficiaries when you die to help pay for funeral arrangements, mortgage payments, and other expenses.

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How to purchase life insurance?

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Do your research on different life insurance companies.  Speak with a licensed life insurance agent and ask questions about their life insurance policy types, premium, and coverage.  Speak to your beneficiary and let him/her know the details about any life insurance company and policy that you buy, so that they are aware that the policy exists.  Make sure that the life insurance company is reputable (well known) and that you can trust them with your money.  Below are some life insurance companies that are considered some of the best that you may want to research to see which is best for you and your financial planning.
 

Northwestern Mutual
Guardian
AARP
New York Life Insurance
State Farm
Penn Mutual
Nationwide
Prudential
Lincoln Financial Group
 

To learn more about life insurance policies and how they work, watch the YouTube video below.

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Source: Youtube

 

 

 

 

 

By Jason Torrents