Whole life insurance covers you for as long as you live if your premiums are paid. You generally pay the same amount in premiums for as long as you live. When you first take out the policy, premiums can be several times higher than you would pay initially for the same amount of term insurance. But, they are smaller than the premiums you would eventually pay if you were to keep renewing a term policy until your later years. Whole life insurance normally builds cash value.
Whole life policies are also referred to as permanent life insurance. There is also a whole life policy that allows you to pay the entire premium due for a shorter period, such as 20 years or until age 65. Premiums for these policies are higher since the premium payments are only made for a specific number of years.
Saturday, April 19, 2008
What is Term Life Insurance?
Term insurance covers you for a 'term' of one or more years or as long as you meet certain criteria, such as being an employee. It pays a death benefit only if you die in that term. Term insurance generally provides the largest immediate death protection for your premium dollar. It generally does not build cash value.
The premiums are based on your age at the time the policy is issued. You can renew most term insurance policies for one or more terms even if you health has changed. However, each time you renew for a new term, premiums will likely be higher- because your age has increased. Many companies offer guaranteed renewable policies, some offer it standard and other offer it as an option that increases your premium.
The premiums are based on your age at the time the policy is issued. You can renew most term insurance policies for one or more terms even if you health has changed. However, each time you renew for a new term, premiums will likely be higher- because your age has increased. Many companies offer guaranteed renewable policies, some offer it standard and other offer it as an option that increases your premium.
How Much Insurance Do You Need?
Ask yourself these questions to help determine how much insurance you need:
How much of the family income do I provide?
If I were to die early, how would my survivors, especially my children, get by?
Do I have children for whom I'd like to set aside money to finish their education?
Does anyone else depend on me financially, such as a parent, grandparent, or sibling?
How will my family pay final expenses and repay debts after my death?
Do I have family members or organizations to whom I would like to leave money?
Will there be estate taxes to pay after my death?
How will inflation affect future needs?
Once you have a good idea of what your needs are, take into consideration any life insurance you have now, including any group insurance where you work or veteran's insurance. Don't forget social security and pension plan survivor's benefits. Add other assets you have such as savings, investments, real estate and personal property. Which assets would your family sell or cash in to pay expenses after your death?
How much of the family income do I provide?
If I were to die early, how would my survivors, especially my children, get by?
Do I have children for whom I'd like to set aside money to finish their education?
Does anyone else depend on me financially, such as a parent, grandparent, or sibling?
How will my family pay final expenses and repay debts after my death?
Do I have family members or organizations to whom I would like to leave money?
Will there be estate taxes to pay after my death?
How will inflation affect future needs?
Once you have a good idea of what your needs are, take into consideration any life insurance you have now, including any group insurance where you work or veteran's insurance. Don't forget social security and pension plan survivor's benefits. Add other assets you have such as savings, investments, real estate and personal property. Which assets would your family sell or cash in to pay expenses after your death?
Should I Cancel the Policy I Have Now?
If you are considering cancelling your life insurance policy, here are some things you should consider:
1) Don't cancel you old policy until you have received the new one. You then have a minimum period to review your new policy and decide if it's what you wanted.
2) It may be costly to replace a policy. Much of what you paid in the early years of teh policy you have now paid for the company's cost of selling and issuing the policy. You may pay this type of cost again if you buy a new policy.
3) Ask your tax advisor if dripping your policy could affect your income taxes.
4) If you are older or your health condition has changed, premiums for the new policy will often be higher. You will not be able to buy a new policy if you are uninsurable.
5) You may have valuable rights and benefits in the policy you now have that are not in the new one.
6) If the policy you have now no longer meets your needs, you man not have to replace it. You might be able to change your current policy or add to it to get teh coverage or benefits you now want.
7) At least in the beginning, a new policy may pay no benefits for some causes of death covered in the policy you have now.
In any case, you should check with the agent or company that issued your current policy. You may be able to get an updated illustration to see how your current policy has performed and what you might expect in the future.
Also keep in mind, that your age is always a factor in determining the premiums for a new policy. If you have had the same policy for a number of years, your premiums on that policy could be less than or equal to a new policy premium for half the face value.
1) Don't cancel you old policy until you have received the new one. You then have a minimum period to review your new policy and decide if it's what you wanted.
2) It may be costly to replace a policy. Much of what you paid in the early years of teh policy you have now paid for the company's cost of selling and issuing the policy. You may pay this type of cost again if you buy a new policy.
3) Ask your tax advisor if dripping your policy could affect your income taxes.
4) If you are older or your health condition has changed, premiums for the new policy will often be higher. You will not be able to buy a new policy if you are uninsurable.
5) You may have valuable rights and benefits in the policy you now have that are not in the new one.
6) If the policy you have now no longer meets your needs, you man not have to replace it. You might be able to change your current policy or add to it to get teh coverage or benefits you now want.
7) At least in the beginning, a new policy may pay no benefits for some causes of death covered in the policy you have now.
In any case, you should check with the agent or company that issued your current policy. You may be able to get an updated illustration to see how your current policy has performed and what you might expect in the future.
Also keep in mind, that your age is always a factor in determining the premiums for a new policy. If you have had the same policy for a number of years, your premiums on that policy could be less than or equal to a new policy premium for half the face value.
Finding the Right Kind of Insurance
All life insurance policies are not the same. Some cover you for your lifetime and others cover you for a specified period of time. Some build cash values and some do not. There are also policies that combine different types of insurance or let you change from one kind to another. There are also policies that may offer benefits, such as a monthly income, while you are still living.
There are basically two types of life insurance: term insurance and cash value insurance. For the most part, you will pay less for term insurance in the early years, but it is not considered an asset because it doesn't build cash value that you can borrow against or otherwise use. Term premiums pay for death benefits. Cash value insurance generally has a higher premium because it pays for the term insurance and the remainder of the premium is invested by the company, thereby building cash value.
Your choice should be based on your needs and especially what you can afford.
There are basically two types of life insurance: term insurance and cash value insurance. For the most part, you will pay less for term insurance in the early years, but it is not considered an asset because it doesn't build cash value that you can borrow against or otherwise use. Term premiums pay for death benefits. Cash value insurance generally has a higher premium because it pays for the term insurance and the remainder of the premium is invested by the company, thereby building cash value.
Your choice should be based on your needs and especially what you can afford.
Friday, April 18, 2008
Buying Life Insurance
When purchasing life insurance, you should make sure that the coverage fits your needs. There is a decision making process which I have broken down into steps for you.
Step 1- Decide how much you need
Step 2- Decide for how long you will need it (until the mortgage is paid off, etc)
Step 3- Decide how much you can afford to pay
Step 4- learn what kinds of policies are available to meet you needs
Step 5- choose the combination of policy and premium and benefits that emphasizes protection in case of early death, or benefits in of long life, or a combination of both.
Step 6- Ask an insurance agent to review your decision with you
Step 7- Make committments you will keep- especially where your budget is concerned
One other thing to keep in mind is that when looking for an agent, it is a good idea to look for an agent who can quote your policy through multiple companies to find the best deal for you. Agents who work for one company may sell a very good product, but they are limited in that they can't shop around for you. I'll talk more about Agents in another post.
Step 1- Decide how much you need
Step 2- Decide for how long you will need it (until the mortgage is paid off, etc)
Step 3- Decide how much you can afford to pay
Step 4- learn what kinds of policies are available to meet you needs
Step 5- choose the combination of policy and premium and benefits that emphasizes protection in case of early death, or benefits in of long life, or a combination of both.
Step 6- Ask an insurance agent to review your decision with you
Step 7- Make committments you will keep- especially where your budget is concerned
One other thing to keep in mind is that when looking for an agent, it is a good idea to look for an agent who can quote your policy through multiple companies to find the best deal for you. Agents who work for one company may sell a very good product, but they are limited in that they can't shop around for you. I'll talk more about Agents in another post.
Important things to consider before buying life insurance
The National Association of Insurance Commissioners prepared a Life Insurance Buyers Guide that gives the following list of items to consider when shopping for life insurance.
1. Review your own insurance needs and circumstances. Choose the kind of policy that has benefits that most closely fit your needs. Ask an agent or company to help you.
2. Be sure that you can handle premium payments. Can you afford the initial premium? If the premium increases later and you still need insurance, can you still afford it?
3. Don't sign an insurance application until you review it carefully to be sure all the answers are complete and accurate.
4. Don't buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early years of the policy.
5. Don't drop one policy and buy another without a thorough study of the new policy and the one you have now. Replacing your insurance MAY BE COSTLY.
6. Read you policy carefully. Ask your agent or company about anything that is not clear to you.
7. Review you life insurance program with your agent or company every few years to keep up with changes in your income and your needs.
1. Review your own insurance needs and circumstances. Choose the kind of policy that has benefits that most closely fit your needs. Ask an agent or company to help you.
2. Be sure that you can handle premium payments. Can you afford the initial premium? If the premium increases later and you still need insurance, can you still afford it?
3. Don't sign an insurance application until you review it carefully to be sure all the answers are complete and accurate.
4. Don't buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early years of the policy.
5. Don't drop one policy and buy another without a thorough study of the new policy and the one you have now. Replacing your insurance MAY BE COSTLY.
6. Read you policy carefully. Ask your agent or company about anything that is not clear to you.
7. Review you life insurance program with your agent or company every few years to keep up with changes in your income and your needs.
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