60 Seconds to Understand Life Insurance
60 Seconds to Understand Life Insurance
Life Insurance 101
The purpose of life insurance is to give a degree of financial security to your loved ones once you pass away. Before purchasing life insurance, take time to reflect on your financial circumstances and the standard of living you hope to maintain for the beneficiaries.
When you purchase life insurance, you will pay a single periodic premium for every individual. Premiums are based on your age, physical condition, medical history, profession, and lifestyle, among other factors.
Why Have Life Insurance?
- To provide financial security for your surviving family members
- Cover payments such as education and a mortgage
- Replace regular income for day-to-day expenses
- Pay for final costs
- Give money to charitable organization
60 Seconds to Understand Life Insurance
Determine if You Want Term Insurance
A term life insurance policy is not a permanent policy, and it expires after a certain number of years.
Two Forms of Term Life Insurance:
- Basic Term Life
- Endowment Life Insurance
Basic Term Life delivers payment to the beneficiaries when you pass away. Occasionally, you may find this type of policy that also includes coverage for disability.
Endowment Life Insurance means together with essential term coverage; you also get a disbursement when the policy expires. Efficiently, your insurance premiums get invested and earn a return.
Endowment life insurance does have distribution costs. A distribution cost is a fee that you give to the insurer to manage your investment.
Endowment insurance typically is typically more expensive than basic term life insurance.
Choose if You Want Long Term Life Insurance
The most common types of long-term life insurance include premiums that are constant and fixed death benefits. Keep in mind though that there are many types of available policies with varying unique features.
For instance, some insurance providers issue often referred to as “adjustable insurance.” The cash accumulated from premium payments can be leveraged to reduce your insurance payments.
Very often long-term life insurance policies are infamous for their details. We highly suggest that you meet with a financial adviser before getting one.
Decide on the Type of Coverage
You want to make sure you are getting the coverage that best fits your needs and risk profile.
A few examples are:
- Critical Illness – Protects you in case of medical emergencies such as cancer, cardiac bypass surgery, and more which other coverage may run short on (or not sufficiently subsidize the cost).
- Total Permanent Disability – Provides a disbursement when you are permanently injured, and it stops you from working.
- Terminal Illness – Delivers a payout if diagnosed with a terminal illness
The high coverage you opt for, the higher your insurance premiums will increase.
Shop Around
Every insurer has its formula that is employed in calculating premiums.
This premium possibly means that five different insurance providers could give you five different quotes. Be diligent, and work with a trusted professional in determining what meets your needs and that can provide you reliable quotes.
September is Life Insurance Awareness Month. An ideal time to meet up an insurance professional or financial adviser to review your current policy – and see how you can make the most of it!