Author: William Smith
Life Insurance - Getting The Coverage That’s Right For You
Nobody likes to think about life insurance - at least, nobody but insurance agents. After all, when we consider insuring our very lives, we are forced to face our own mortality.
It’s important to note that life insurance isn’t for everybody, but if you are the head of a young family, it is vitally important to ensure that your children and/or spouse not be beset with financial hardship in addition to emotional grief in the event of your untimely passing.
Term or Cash Value Life Insurance?
The first thing you need to determine is which type of life insurance is a best for you. Term life insurance is in effect only for a specific duration, or term, specified in the policy. If you were to pass away during this term, your beneficiaries would receive the policy’s death benefit.
If you are fortunate enough to live through the duration of the policy, then it expires worthless. Most term life insurance policies allow you to renew, but you can only do so at a higher premium.
The benefit to you is that the initial premiums are much lower than with cash value (see below), and you might decide you no longer need life insurance once your children have reached adulthood.
Cash value life insurance has much higher initial premiums, but the premium never goes up. Furthermore, a portion of all premiums that you pay in bears interest, making cash value life insurance an investment product as well as insurance.
Earnings generated by the cash value can be withdrawn or borrowed against, but the increased price of the monthly premiums makes cash value life insurance a poor fit for most people. The typical 40-year-old would pay more for two months of cash value life insurance than he would for an entire year of term life.
How Much Coverage Is Enough?
The conventional rule of thumb is that a growing family needs at least five years of the breadwinner’s annual income in addition to any outstanding debts. An additional $10,000 should be budgeted for funeral expenses, and another $15,000 or so to provide an added cushion.
So, a 40-year-old father of three with a wife who does not work outside of the home, and earns $70,000 per year should be insured for a base amount of $350,000. If the family carries $10,000 in debt, then this should be added to the $25,000 in funeral and other expenses for a running total of $385,000.
Although his children would undoubtedly qualify for financial aid, it is probably best to budget at least another $45,000 for their college education for a grand total of $430,000.
Some Simple Ways To Save Money
First and foremost, don’t smoke. Justifiably, smokers pay much higher premiums.
Second, you should strongly consider term life insurance, particularly if you are 40 or younger. Look at how much you will be saving each month compared to the cash value premiums, and invest that much into a mutual fund of your choice.
You’re likely to see far better results, and eventually you may decide you no longer need life insurance. After all, if you build an investment portfolio of sufficient size, it may be your best life insurance product of all.
Most of all, keep in mind that there are literally thousands of companies that sell life insurance, and competition within the industry is steep - that’s good for the consumer. Shop around, interview multiple agents, and find the one right for you.
Author: Ivon T. Hughes
Many internet searches reveal that you can get free term life insurance quotes and premiums that are up to 70% off. With so many options available, is it always in your best interest to get the cheapest term life insurance coverage? And what does “up to 70% off your term life insurance” really mean?
Cost effective term life insurance is simply basic life insurance that pays out a lump sum after your death. The premiums for these polices are generally low because the policies are like your house insurance; there is no cash value. There are two basic types of term life insurance - decreasing term life insurance and level term life insurance, but decreasing term life insurance is gradually being phased out.
What is Term Life Insurance?
Level term life insurance policies are not as cheap as decreasing term life insurance but do a better job of protecting you. Both of these life insurance policies have many similarities. The reason for the different price structures are that level term life insurance policies, owned by you, can pay off your mortgage and still leave a pay out for your family. The group term life insurance you buy through your bank, has a decreasing balance but keeps the same premium. A cheap decreasing term life insurance policy pays only the bank a lump sum to clear your mortgage; it doesn’t leave any money to pay those you leave behind.
Term Life Insurance - Mortgage Priorities
If paying off your mortgage is your priority, then you should look to level term life insurance. You might have a 20 year mortgage but a 10 year level term life insurance policy. As you will need to renew the term life insurance policy at the 10th anniversary, you might want to consider making it a 20 year term life insurance policy.
Author: Mike Armstrong
Life insurance offers you an opportunity to ensure the financial security of your family and loved ones, no matter what happens. Life insurance can be used to:
* Pay off any final expenses or personal debts like credit cards, car loans or a mortgage
* Offset the loss of your income for those who rely on you for financial support
* Contribute to the future education of your children
* Protect your estate by helping to pay the taxes due on an estate upon death
* Leave a legacy to your favourite charity
Who should buy life insurance?
The purchase of life insurance is often associated with major life events like getting married, buying a home, or having children. However, if these don’t apply to you ask yourself the following questions. If you answer yes to any of them, you’ll want to consider life insurance:
* Does anyone rely upon you for financial support? Whether it’s a spouse, child, grandchild, parent or dependent adult, life insurance will help them protect their financial well being no matter what happens.
* Do you have a mortgage, or any other debts? If so, a life insurance policy can provide a way to take care of these outstanding bills along with any others like funeral expenses, legal fees and taxes, and medical expenses.
* Do you own a business?
o For sole proprietors, you’re accountable for the debts your business owes. If you do not have enough life insurance to cover these debts, your personal assets could be liquidated to pay them off, possibly leaving little left for your family.
o If you’re in a partnership, a life insurance policy where the other partner is the beneficiary means the surviving owner has the cash easily available to buy out your portion of the partnership from the estate.
* Do you want to leave a legacy? Life insurance policies can be used to leave money to your favourite charity.
How much will life insurance cost?
There’s no such thing as a one-size-fits-all insurance policy. Insurance professionals need to look at a lot of different things before they come up with a final insurance rate. They’ll consider your age, gender, whether you’re a smoker, and your past and current health record and family history. Then they’ll balance all that with the amount and type of policy that you’re applying for.
What types of life insurance are available ?
There are two main types of life insurance, level life insurance also known as term life insurance and decreasing life insurance or mortgage life insurance.
Level life insurance as it suggests is level cover that stays constant during the full term of the insurance and a level lump sum pay out would occur upon death. The sum assured is decided from the outset of the policy.
Decreasing is most often used to cover a mortgage and works exactly the same as level life insurance however the sum assured decreases over the term of the policy this is ideal cover for a mortgage or any decreasing debts that maybe paid off over a period of time.