Affordable Life Insurance
Life insurance is an agreement between an insurance company and a person, providing coverage to the beneficiaries in the event of the insured’s untimely death. The beneficiaries named in the insurance policy enjoy the proceeds of the person that signed the agreement. A beneficiary is an organization or person designated by the policyholder to get financial assistance from the insurance company in the event of the insured’s untimely death. The term is the period for which insurance coverage operates as stated in the policy.
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If the policyholder dies, the beneficiaries should present the insurance company with a death certificate to make a claim. Additionally, the insurance company requires complete paperwork under a representative’s direction to get the proceeds. If the beneficiary is children, they will have to file the claim under a custodian and a named person to manage the proceeds. When there is no designated custodian, the court will appoint one to manage the minor’s benefits.
Types of Life Insurance
The two main kinds of life insurance covers include temporary insurance and permanent insurance.
- Temporary insurance is called term insurance, and the coverage occurs for a specific period from five to thirty years. Contrarily, permanent insurance typically provides life coverage but can offer cover to a particular age. There are two types of temporary life insurance based on premium rates. Some policies provide a plan for paying the same premium rate for a stipulated time. Others, such as the annual renewable term, offer a yearly revision of the premium payment.
- Permanent insurance encompasses savings and death proceeds while allowing the policyholder to borrow money or invest using the cover. Additionally, beneficiaries can enjoy the profits regardless of when the policyholder dies. Permanent insurance is available as universal life, whole life, variable-universal life, and variable life insurance coverage. A fully underwritten policies necessitate a medical exam where the premiums are lower when the results indicate good health. However, a simplified issue policy requires the policyholder to answer a set of health questions. The downside of this is that the simplified issue policy premiums cost more than the fully underwritten ones.
How to Determine Premium Rates
Life insurance companies use the age and health status of the policyholder to determine the premiums. Age is the primary factor used in calculating the amount one will pay to service an insurance cover. Other factors that calculate premium rates include gender, family medical history, residence location, marital status, and lifestyle. Additionally, a medical checkup and answers to the policy application’s health question determine the premium rate.
Men get to pay premium rates because of shorter life expectancy compared to women who get lower rates. Likewise, risky lifestyles such as skydiving, smoking, and alcoholism increase the premium rates. Individuals between the ages of 25 and 35 have lower chances of death. They can seek insurance cover, such as cost-effective temporary life insurance. However, for individuals above 55 years, most people take life insurance for the financial body rather than death. At this age, retired citizens use insurance to cover future medical costs.
Reviewing the Insurance Policy
Every policyholder should review their policy and adjust it to meet their family’s short-term and long-term needs. Some of the factors that necessitate a revision of the cover include marriage status, changing job, having another child or dependent via adoption, and selling or buying a home. Policyholders should investigate the company’s financial strength ratings by visiting independent sites like A.M. Best Company and Moody’s Investor Services. One can also review the insurance company’s complaint records by checking with the state department concerned with insurance.
What are the reasons for taking an insurance cover?
There are five main reasons why most people take life insurance plans, which might stem from either getting older, opening businesses, or building a family. Life insurance is a means to protect and provide financial support to a policyholder’s family. When one dies, proceeds from the life insurance become the income source for their loved ones. These proceeds help the beneficiaries maintain their lifestyle and living standards.
A life insurance policy acts as an asset left for heirs when the policyholder dies. A life insurance cover acts as an inheritance that provides a robust financial future for the policyholder’s children as they grow up. Besides, the proceeds can settle the death taxes for assets left behind by the policyholder. Furthermore, it provides financial security for children’s monetary needs in the event the parents die.
The cover can offer security for college education, business, and life ventures that include wedding and business startups. Proceeds from a life insurance coverage can pay off the debts of the policyholder. If the policyholder perishes, the monetary benefits can service outstanding debts like car loans, mortgages, and credit cards. Moreover, it can cover burial and funeral costs alleviating the financial burden the policyholder’s family might undergo.
Furthermore, a life policy helps remove life uncertainties and keep loved ones at ease during the time of loss. Policyholders have a life insurance cover that allows for borrowing or withdrawing cash value, resulting in a saving plan. The interest credited for such an event is tax-exempt in a death claim and tax-deferred when the holder is alive.
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Study the Life Chart
Before taking any insurance life policy, one should identify when to choose a plan and how it fits their needs. For example, young couples with children require the most proceeds from a life insurance policy to cater to their children’s needs. The death of either spouse has immense gravity on the lifestyle and increases expenses for the surviving parent. Term insurance is a cheap option for a young family, and it’s best to choose a plan with a term not less than 20 years.
Conversely, a young couple with no children might not need a life policy as much as a couple with children. However, couples that need to maintain their lifestyle and living standards when another die can take life insurance. Single parents need a policy that provides the highest proceeds because their salary alone might not raise them. Additionally, the death benefits might serve as financial security for the child and an income for the single parent.
Single parents should seek a low-cost policy providing the most coverage for their children and lifestyle. Term insurance is the best option for single parents. Parents that have college children can transform term policies to permanent insurance that creates cash value. An insurance policy, such as the whole life, can supplement one’s retirement savings.
Additionally, it can cover expenses and tuition fees for the policyholder’s college education. These parents can seek ten-year convertible term insurance before the age of 65 to support their grown-up children in college or business ventures. Conversely, retired citizens are the least in the life chart to require life insurance because they have retirement benefits.
However, senior citizens who do not have a retirement plan can take a life policy as long as they are below 80. Policy premiums for senior citizens are high because of low life expectancy. Furthermore, an approach that builds cash value offered by permanent plans can supplement retirement savings. Features such as the final expense insurance can cover funeral and burial expenses that retired citizens should consider when choosing a life policy.