What is Life Insurance
Simply put, it is an agreement between you and the insurance company where you pay a small monthly premium, and after your death, they will leave a large predetermined amount for whomever you choose.
There are many different forms of life insurance, but in each case, it is designed to help protect the family you leave behind financially. With life insurance, you can help your spouse pay off a mortgage, loan, college tuition, or just live comfortably.
How Much Life Insurance Do I Need
The amount of life insurance required for each person varies. In fact, it all depends on your goals, your family, and the costs your family has to bear when you are not there to support them.
If your plan is to cover only life expenses and funeral expenses, you may want to consider insurance for funeral and burial expenses only. If your plan is to help pay for a mortgage, tuition, or other large expenses, you may want something more like a term or a lifetime policy for 100,000 or $ 250,000.
An independent agent can help you navigate through your options as you discuss your goals to find the right amount of coverage for you and your family.
How Does Life Insurance Work
A life insurance policy is a contractual arrangement between you (the policyholder) and the life insurance company. The policyholder determines the required amount of life insurance coverage and pays a premium to the life insurance company to enforce the policy.
Upon approval, you will pay your premium as determined by the policy, whether it is a unit amount, annually, semi-annually, or monthly.
If the policyholder dies while the life insurance policy is in force, the life insurance company will pay the unit amount of death benefits specified in the policy to the designated beneficiary.
What is the Difference Between Whole Life and Term Life
First of all, they are both great options when it comes to protecting your family’s future. The final decision comes down to what best matches your goals and budget.
The whole life provides coverage from that day until your death, no matter how far in the future. If you start coverage when you are young and healthy, it is a very affordable option with guaranteed coverage as long as you are around. Applying in your 50s for your entire life, however, is a very different and expensive story.
Term Life provides coverage on a fixed payment schedule for a predetermined period (usually 10, 20, or 30 years). After the term expires, the policy expires. When your family needs it the most, it’s usually the least expensive way to buy a substantial death benefit.
What is the Best Life Insurance For Me
Well, the answer is not so simple. To find the best option, you need to talk to an independent agent. Together, you can move on to your plans and goals for the future to help you dial in the right solution for you.
Let’s say you’re in your 30s, married with two young children and a relatively new mortgage. You have a lot of expenses to think about over the next 20 years or so, such as paying for your home, college tuition for the kids, and so on. Term life insurance may be the best option for you.
Now, let’s say you’re in your 20s, newlyweds and still want to plan ahead for the big life to come. You want to be able to one day leave a nice little legacy for your children. Now is the best time to consider whole life insurance for the rest of your life with very reasonable price protection.
What Happens If I Lie on My Life Insurance Application
No wonder you shouldn’t lie when it comes to your life insurance application, although some still try to tamper with the truth by thinking that they can keep their rates low. Obviously, age is not something you can change, but many people will claim that they never smoke or that their cholesterol is right when they can’t. It is safe to say that in the end, the carrier will find out the truth. And if this happens, during or after the application process, you will be denied coverage or your policy will be terminated. And that’s never a good situation.
Is Life Insurance Taxable
Life insurance income is generally not taxable if it is paid to a specially designated beneficiary such as your spouse or children. Life insurance income can be taxable, however, if you designate your property as a beneficiary. At that point, the income becomes part of your estate and may be subject to estate tax.
Why Should I Work With anIndependent Agent
With access to multiple insurance companies, independent insurance agents are unlike any other type of agent. They will help you find the best coverage option and the most competitive price, all for free. To find a local independent insurance agent, click here.
No one wants to think about life after their departure, but sadly, if you do not make a solid plan for the people behind you, they may end up in a worse situation. This is life insurance to help protect your family financially in the event of your death and to take care of mortgages, tuition, funeral expenses, and more.
So where do you start? First, it is important to understand a little more about your options, then an independent insurance agent can help you layout your best options. From there, the process is a simple application, and once approved, you can enjoy a worry-free life.
What is Life Insurance
At its core, life insurance is an agreement between you and the insurance company where you pay them money (premium), and if you die, they will leave a certain amount to the chosen person (beneficiary). Or at least, that’s the definition. Life insurance means something different for everyone. Tuition for your children. Your mortgage has paid off. Legacy of leaving behind. People buy life insurance for many reasons, all of which are important.
The main reasons people buy life insurance
Why Should I Get Life Insurance
To understand the importance of life insurance, it’s a good idea to think about the cost of living after you pass out. Spending some time figuring out the financial responsibilities that will fall on your family after you’re gone is a great way to dial in the full amount of coverage.
Proper insurance will cover most, if not all, of the major expenses that your family may come to mind after you leave. A little planning now can go a long way in the future. But what kind of life insurance do you need? What will help you to meet the needs of your family? Which one fits in your budget? Don’t worry, most of the people are not aware of the different life insurance options and what sets them apart. An independent agent can help you with all of this and come up with the best options for you.
What are My Life Insurance Options
The beauty of life insurance is that there is an option that works for almost every need and budget. The term, Exhaustive and Universal is three different types of coverage, each ending with the same result – paying a certain amount to the person you choose at death.
Term Life Insurance: This option is ready for young people as it is a temporary plan that covers you only for a certain period of time, usually 10, 20 or 30 years. If you die within that time limit, a certain amount will go to the people/persons you have chosen.
Whole life insurance: The concept of a lifetime is the same as a term, but the policy is active as long as you live. It also has bells and whistles.
- As an added bonus, it also features a savings account that earns money. Ultimately, this will affect the amount of policy coverage. At that point, the insurer tells you that the benefit is the same as a savings account and you can cancel the policy and keep cash instead.
- Even better, you can also use this savings facility in the form of a loan. You can borrow any cash you earn, however you will eventually have to repay it to continue the coverage.
Universal Life Insurance: This is like a whole life plan but with some extra bonuses.
Like the joint policy, the universal policy also has a savings account facility, although it also earns interest. Because it earns interest, many pay more than their premium to take advantage of really high returns.
Also, you can not only borrow from this account, but you can also leave the payment without penalty (as long as there is money in the account). Those who prefer to be active with their savings and investments can really take advantage of this option. But, it comes with its own risk, as fluctuations in interest rates will have a direct effect on your savings.
term vs. whole vs. universal life
|Choose length of policy||Yes||Active for life||Active for life|
|Provides lifelong coverage||No||Yes||Yes|
|Guaranteed payout||Yes, within term length||Yes||Yes|
|Accumulates cash value||No||Yes||Yes|
|Cash value risk||N/A||Only the insurer||Interest rate fluctuation risk|
|Loans / Withdrawals against benefit||N/A||Yes||Yes|
|Common uses||Income replacement||Income replacement / Supplemental income / Estate planning||Income replacement / Supplemental income / Estate planning|
What Type of Life Insurance Do I Need
This is a really great place to start your conversation with your free agent. They can help you decide what works best for you, your family, and your budget. To help you get a better idea, check out some examples of life insurance coverage that may best suit your needs.
Scenario 1 – Tom, a young father
Tom is 32 years old, married and the father of 3 primary children. He has another 20+ year home mortgage and 2 cars.
- They currently have multiple loans ranging from cars to mortgages that require financial coverage. In addition, their three children can benefit from the money saved for college. Tom can really benefit from a term life policy.
Scenario 2 – Judy, single mother
Judy is a young, single mother of two looking for the perfect option to leave behind better financial security for her children. It is a non-smoking health nut that has no worries in the final investigation.
- Being young and healthy, Judy can get full life insurance at a very affordable rate. Even if she dies unexpectedly in the next few years or so, her whole life will allow her to leave a solid financial base for her children.
Scenario 3 – Gordon, a casual day trader
Successful, active, and in the early ’40s, Gordon has experience playing with finance, stocks, and retirement investments.
- Because Gordon has the experience to raise his money and understands the risks involved, he will be a good candidate for universal life insurance. It gives him coverage until the day it passes and if he invests more in his policy than his premium, he can return more than what he has invested.
How Do I Apply For Life Insurance
The process is really, really simple. When you work with an independent insurance agent, you miss out on a lot of hard work. Once you have discussed your goals, they will start looking at the many top life insurance providers and bring you to quote options.
Step by step guide to applying for life insurance
Think about it: Take some time to think about your biggest worries for your family in a world where you are no longer. Home. Car kids. Write a list.
Contact Agent: Find your local independent insurance agent and go over your notes and future goals before shopping around for the best quotes.
Review your quotes: Together with your agent, you will go through your options to find the one that works best for you.
Complete the application: your health, history,
Take a medical exam: You will take a medical exam to check and make sure there are no discrepancies or red flags in your application.
Underwriting: The carrier’s underwriting team will review all the information and make sure everything looks good and your price matches your risk.
Sign and relax: Once you are approved, you will sign the documents, deduct the check and you are ready to go.
Are Life Insurance Benefits Taxable
Life insurance income, aka “death benefit” is not taxable as long as it passes to the beneficiary as a large payment.
That being said, if your death benefit is paid in installments when the policy is set up, the beneficiary may have to pay interest tax on the outstanding amount. It is also common to tax death benefits if your designated beneficiary is your estate.
If the value of your property exceeds the IRS limit – federal and state exemptions – the difference will be affected by the estate and possibly inheritance tax.
Your Independent Insurance Agent Has Your Answers
Whatever you want, your agent has your back. With a brief introduction to your life insurance terms, discounts and procedures, you know what kind of questions to ask. Your agent will ask you about your family, life, and goals and help you find the right coverage for you at the right price.