Choosing a Life Insurance Policy

Life insurance provides a source of financial protection in the event of an unexpected death. While many people think it’s used primarily for burial costs and expenses, life insurance can also be used in other ways depending on the type of plan a person buys. Determining the type of life insurance plan to purchase involves identifying a person’s current financial situation as well as any anticipated financial needs loved ones may have in the event of a death.

Uses for Life Insurance

Uses for life insurance run the gamut in terms of where and how policy benefits can be applied. This is especially the case with policies that include a “savings” feature in addition to the actual insurance protection. Because of its varied uses, many people use life insurance products as a part of their financial planning goals.

Some of the uses for life insurance benefits include –
• Retirement income
• Paying off debts
• Having an emergency cash reserve to fall back on
• Covering funeral and burial costs
• Education funding for dependents
• Paying off any debt obligations in the event of a person’s death

Ultimately, a person’s individual circumstances determine what type of life insurance will best meet his or her needs.

Obligations and Needs

A person’s current age and financial responsibilities have a significant bearing on the type and amount of life insurance coverage needed. People whose families depend on their income earnings have more to consider in terms of future needs and coverage amounts than a single individual. With older individuals, life insurance costs are typically more expensive so this has a bearing on what a person can afford now versus future coverage needs.

Some areas to consider when determining coverage needs include –
• Current asset holdings
• Sources of continuing income
• Debt obligations
• Anticipated future income

As life insurance is meant to replace lost income in the event of an untimely death, a policy’s benefit amount should be enough to replace this source of income so the financial needs of loved ones are met.

Term Life Plans

Someone looking for the highest amount of coverage protection at the lowest price may want to consider a term life insurance plan. Term life is a straightforward type of coverage that’s based on a “term” or period of time in which coverage remains active. Once the term limit is over, the policy must be renewed in order to remain active.

This type of plan only provides insurance protection, so there’s no cash value involved. When it comes time to renew, the policyholder has aged so the cost of a renewal policy will be more expensive. In effect, this type of plan works well for younger individuals or people just starting a family. After a certain age, the premiums may run too high to be affordable.

Whole Life Plans

Just like the name says, whole life insurance plans provide coverage for the life of the policyholder as long as premium payments remain up-to-date. Cost-wise, whole life policies are more expensive than term life because of the cash value or savings feature included in the plan. This cash value feature can come in handy for emergency purposes, though any amount borrowed must be paid back or else it will be deducted from the total death benefit. It can also provide a source of income once a person reaches retirement age.

While less affordable at the start of coverage, whole life premium costs remain the same throughout the life of the policy. When compared to term life, premium costs run considerably cheaper once a person reaches middle age and beyond.

Variable Life Plans

Much like whole life coverage plans, variable life policies offer a death benefit amount and a cash value feature. Unlike whole life plans, variable policies do not guarantee a minimum death benefit or a minimum cash value amount. With variable life polices, the insurance company invests the policyholder’s premium payments in stocks, bonds, mutual funds, money markets and real estate pools. The success (or failure) of these investments determines how quickly a person’s cash value will grow.

Because of the way they’re structured, variable policies allow for more flexibility in terms of required premium payment amounts during the first five to ten years of plan coverage. This type of plan can work well for young couples who expect to be making more money in five to ten years time. On the other hand, variable life policies can get costly should the underlying investment products perform poorly. When this happens, policyholders have to pay more in premium costs in order to maintain coverage and keep the policy active.

Specialized Plans

Specialized life insurance plans are designed to meet the coverage needs for specific situations or life circumstances. As such, these plans tend to carry higher coverage costs than the other more standard plan types. For someone wanting to insure his or her immediate family as a group, the Family Policy provides insurance protection for the husband, wife and children.

In the case of insuring two or more persons, Joint Life and Survivor Insurance is designed to pay out death benefits upon the passing of the last insured, with the listed beneficiaries (a child or business partner) receiving the benefit. This type of coverage is often used to pay-off estate taxes so the surviving children aren’t held responsible for the debt.

In the case of insuring two people or a married couple, Joint Life Insurance pays a death benefit when one of the two dies. The remaining person on the policy then becomes the beneficiary. Compared to Joint Life and Survivor Insurance, Joint Life coverage alone carries a higher cost since the likelihood of both people dying is less likely or less “immediate” than the death of one person.

Ultimately, determining which life insurance plan works best means finding a balance between affordability and overall coverage goals. As income earnings can change over time, anticipated future earnings should also be considered when choosing a policy plan.

Sources –
http://www.insurance.ca.gov/0100-consumers/0060-information-guides/0020-life/life-insurance.cfm

http://www.dfr.vermont.gov/insurance/insurance-consumer/consumers-guide-buying-individual-life-insurance#3.%20The%20Four%20Basic%20Types%20of%20Life%20Insurance%20%E2%80%9CPros%E2%80%9D%20and%20%E2%80%9CCons%E2%80%9D

http://www.dfs.ny.gov/consumer/cli_basic.htm#Variable

The Benefits Of Life Insurance

Life Insurance Greatly Improves Quality of Life

There are two main benefits of life insurance, security and savings. The security is for the family or other beneficiary in the event the policy holder dies. A sum of money will be given to the beneficiary so they need not suffer financial hardship after the death of a loved one. The savings comes from the investment policy where the objective is the growth of capital by single or regular premiums. Most Americans do not understand the benefits of life insurance.

Life insurance can solve many problems that arise when a person dies. If that person has financial dependents including family and people who need assistance for parenting or full-time caretaking, life insurance can make sure the dependents continue their lifestyles.

When a person dies, there could be many unpaid debts that the survivors are responsible for paying. Life insurance can make sure the survivors maintain their financial dignity and pay the debts.

People who have a large estate could leave a huge estate tax for their survivors when they die. Life insurance could take care of this.

Main Types of Life Insurance

There are several different types of life insurance plans and each one can be uniquely modified. The main ones are:

• A Permanent Life Policy is active until the policy matures. There are four types of permanent life insurance plans including whole life with premiums paid throughout the life of the policyholder with the sum insured payable at the time of death. This is the least expensive policy and is suitable for people who want to provide for their families or charitable institutions after death.

• Universal Life has flexible premiums and death benefits which can be decreased by the policy holder. They can also be increased by the policyholder, but this would need a new underwriting. This flexibility has the disadvantage of reduced guarantees. There are four main types of universal life insurance policies including interest sensitive, guaranteed death benefit, variable universal life and equity indexed universal life insurance.

• Limited Pay insurance premiums are paid over a specific period of time with no additional premiums. The time frame is usually 10 to 20 years. Term life insurance is the cheapest policy and will cover the policyholder for a specified term. If the policy holder dies during that term, the beneficiaries will get the insured amount. The premiums are low, but at the end of the term, if the policyholder is still alive, they get nothing.

• Endowments are insurance policies that accumulate a cash value that equals the death benefit at a certain age of the policyholder. This type of insurance is paid out at the specified time or age of the policyholder whether the insured dies or not.

• Accidental death insurance policies are specifically to cover the policyholder if they die because of an accident. These cover injuries and death but do not cover health problems or suicide. These policies are less expensive than other policies because they only cover accidents.

• A Multipurpose policy covers several insurance needs of the policy holder including provision in old age, income for family member’s education, wedding or other start in life. The beneficiaries get maximum protection if the policyholder has an early death with a regular monthly income for the unexpired time left as well as an additional monthly income for two years from the date of death. Part of the insured sum is paid at the time of death and the balance is paid at the end of the specified term. When the policy matures, the policyholder gets the full insurance sum in cash or as a monthly pension. It can also be given as an increased sum paid at the time of death. Premiums are paid until the specified term or until death.

Insurance Options

There are a variety of insurance product options including Guaranteed Cash Values, Money Back and Guaranteed Maturity Values. These options are incentives to make the different plans more attractive and valuable to the policy holder.

• Guaranteed Cash Value is an account that builds as part of a permanent life insurance policy. It is a savings account with interest and is tax-deferred, so it can be used later in life for emergencies.
• Money Back insurance plans give the policy holder a lump sum of money on a regular basis that they can spend for planned expenses or unexpected situations.
• Guaranteed Maturity Values are the amount of the life insurance policy that is guaranteed after a specified amount of time.

Long Term Investment

Life insurance is a safe and profitable long-term investment. The insurance sector is highly regulated. The policy holder’s money is protected by the Insurance Regulatory and Development Authority (IRDA), and the investment is guaranteed long-term which is safer than risky short-term investments for short term gains.

Life insurance is an excellent tool for planning the retirement years. With the guaranteed income through annuities, the money that is saved while the policyholder is still earning is used to give a steady source of income during their retired years.

Other Benefits

There are tax benefits for permanent life insurance. With careful planning, a policy holder can reduce their taxes while they are alive and, after they die, for their beneficiaries. With a permanent life insurance policy the policy holder can transfer to the beneficiaries their assets income tax-free and estate tax-free and also build a tax-deferred amount of cash inside the policy.

A policyholder can take a loan against the insurance policy for any unplanned financial emergency without adversely affecting the life insurance benefits of the policy.

A life insurance policy is also a tool to cover loans and mortgages that the policyholder takes, so that the burden doesn’t fall on the life insurance beneficiary in the event the policyholder dies.

Another security benefit is protection against the high cost of medical expenses. There are riders as well as health insurance plans that offer protection in the event the policyholder needs hospitalization.

Understanding Your Life Insurance

Life Insurance

Life Insurance is an agreement that is made between an insurer and the insurance policy holder. This policy statement obliges the insurance company to reimburse an appointed beneficiary an amount of money or benefits at the time of the insurance policy holder’s death. Other circumstance like critical or terminal illness may also warrant compensation depending on the insurance contract. The insurance company usually collects a premium form the policy holder either as a lump sum or a regular fee.

The Importance of Purchasing Life Insurance

There are a lot of reasons why purchasing a financial plan is a necessity today. It gives the policy holder and their surviving dependents financial security and protection. Additionally, it is used to pay debts after the insured person’s death. It is also being spent to pay for the insurance policy holder’s burial expenses. According the U.S. Census website, the number of Americans purchasing Life Insurance has decreased in recent years due to the effects of the economy suffering from a recession.

Selecting the Right Kind of Insurance Policy

According to American College, three out of ten U.S. households said that they would have problems making insurance payments after several months. This is the reason why selecting the right life insurance is very important.

Term policies cover a span of time specified in the insurance policy. The specific period could either be an individual’s age or a time period that could be as brief as one year or could even reach five, ten or 20 years. No benefits are payable is the policy holder lives after the time period specified. However, the insurance company will give the amount allocated to beneficiaries if the policy holder dies within the policy term period specified.

Cash value insurance is another type of life insurance that has a cash value accumulation feature that is combined with death benefits. The amount of money paid in the early years of the policy is much higher than with a term policy. However, interest accumulates in this life insurance policy if the premium being paid exceeds the death benefit costs. The cash value could be paid to the policy owner if the insurance is surrendered when the client is still alive. A deduction on the refund is also noted if there are outstanding loans made before the policy is surrendered.

There are many different types of cash value insurance on the market today. Whole life insurance provides an entire lifetime of insurance coverage compared to term insurance that only covers a specified period. Meanwhile, universal life insurance offers flexibility by focusing on the three essential features of a policy that includes the cash value, premium, and death benefits separately. It also allows a policy holder to skip or change insurance payments or alter the death benefits more easily compared to other insurance policies.

Variable life insurance contains a death claim that differs based on the policy’s asset investment experience. The death benefits tend to increase with this policy if the invested fund has a higher return rate. However, a negative or a low rate will result in decreased death benefits received. Variable universal life insurance contains an investment account like variable life insurance while maintaining the properties of a universal life insurance.

Credit life is an insurance policy that will pay a borrower’s remaining loan balanceif he or she dies. A credit life policy might be required by lending companies or banks as a loan condition. A life insurance policy owner might not need a credit life. Some death benefits may be transferred as part of the agreement with the lender in order for the remaining balance of a loan to be paid.

Health coverage and credit accident insurance offers loan balance payment in case a client gets injured or sick and cannot meet repayment obligations. The cost of the premium is added to the loan payments as part of the conditions when a loan is approved.

Coverage Modifications

Additional term insurance provides additional term coverage for either universal life or whole life policies. For example, a $50,000 policy value with an extra insurance term rider of $100,000 is needed if the policy holder wants $150,000 total worth of coverage. A policy holder must earn more money in order for all or some of the cash term riders to be converted to the main cash policy value. A lot of individual life insurance policies are converted into cash value insurance using this method.

Guaranteed insurability ensures that a person can purchase extra policy coverage despite their health condition or age. An insurance rate may be estimated by the use of these variants. Additional coverage is usually bought when the policy holder reaches an agreed time period or event.

Accidental death gives much higher death benefits that usually double in value if an accident causes the sudden demise of the plan holder. Some conditions might be applied. A disability waiver permits policy holders to cancel out paying insurance premiums if they are classified as disabled according to the company’s policies. This is only applicable for policy holders below 60 years old.

An accelerated death benefit program offers prepayment of all or some of the death benefits while the policy holder is still alive but is suffering from a specified disease or a terminal illness. This is popular because it assists in the payment of end-stage care. An attending physician is usually needed to confirm that the plan holder cannot perform basic activities of daily living. A spousal rider offers coverage for the policy holder’s spouse. Basically, two policies are combined into one on this rider.

6 Common Life Insurance Mistakes

Buying life insurance is an important and often beneficial step that many adults choose to take. Life insurance provides a cash payout to beneficiaries named in a policy upon the insured’s death, and these benefits may be used to provide for the named beneficiaries financially, to help the insured plan for the future and for various other purposes. However, there are often questions about how much insurance to buy, what type of insurance is right for an individual’s needs and other factors that can make buying insurance rather complicated and confusing. By paying attention to six common areas where mistakes are commonly made with a life insurance purchase, it may be possible to make the most out of a life insurance purchase.

1. Buying the Wrong Type of Coverage
According to the USA.gov, life insurance buyers should be aware that there are two main types of life insurance. While both term life and whole life will offer death benefits, there are considerable differences between these two types of policies. For example, term life is more affordable, but it will expire at the end of the specified term length. Whole life, on the other hand, is more expensive, may never expire and may accumulate cash value. Because of these differences, whole life may more often be purchased as an investment while term life is purchased for the sole purpose of providing death benefits. Buying the wrong type of coverage may result in paying too much for the coverage needed, having coverage expire when it is still needed or other factors.

2. Not Buying Enough Coverage
A second common mistake that is made when buying life insurance is not buying enough coverage for the needs of the insured or the beneficiaries. According to the Ohio Department of Insurance, a few questions should be asked to determine how much coverage is needed. These questions may include how much money is needed to pay for funeral expenses, how much income will the family need on a regular basis to replace lost income and how much money is necessary to pay for the kids’ college education. Each individual, however, will have unique factors to consider, and these questions are only representative of how insurance benefits may be used. It is important to consider the reason for buying life insurance coverage and to determine how much coverage may be needed to meet those needs.

3. Not Naming the Right Beneficiary
In many cases, a life insurance agent may provide assistance with identifying and naming the right beneficiary for your needs. However, one common mistake that people make when buying a new policy is to name the estate as the beneficiary. This may result in unnecessary taxation of the death benefits. The right beneficiary may be an individual, such as a spouse or parent. Consider who may experience the greatest financial setback as a result of the individual’s death, who may be caring for children and other factors when determining who the right beneficiary is. Keep in mind that it is possible to purchase two or more smaller policies and to name different beneficiaries for each policy.

4. Not Naming Backup Beneficiaries
In addition, it is important to name backup beneficiaries. Many people will purchase a life insurance policy and not make any revisions or changes to it for years. However, if a beneficiary passes away either when the insured does or before, the named beneficiary in a policy would not be available to collect the proceeds. In this case, the death benefits may go to the insured’s estate, and the proceeds may then be subject to additional and unnecessary taxation. For this reason, it is important to name at least two backup beneficiaries and to review life insurance policies on a regular basis every few years.

5. Buying Life Insurance Later in Life
It is also common for individuals to purchase life insurance later in their lives, and this can result in unnecessary expense for the policyholders. Life insurance will become increasingly expensive with each year older the insured is, and other factors, such as the health status of the insured, will also play a role in the cost of the premium. By planning ahead and purchasing ample insurance when the insured is younger, the cost of insurance may be far more affordable.

6. Not Comparing the Options
As a final note, it is important for a policyholder to compare all of the life insurance options available. Many people have an affordable life insurance policy available through their employer or through various organizations or associations that they are a member of. These options may provide at least some of the coverage that is needed, and they may offer more affordable rates. For additional coverage that is needed, it is important to compare quotes from different insurance companies so that the most affordable coverage that meets the policyholder’s needs is purchased.

Buying life insurance can be confusing, and complex questions must be answered to ensure the right coverage is purchased. Perhaps the most important step that an individual may make before making a purchase is to get educated. There are many great resources online that can be used to answer questions and to guide an individual in making a great decision about their coverage. In addition, a trusted life insurance agent may also provide additional guidance when buying a policy initially as well as when reviewing policies and updating coverage in the future.

Source:
http://www.bfa-online.com/news038.html
http://www.insurance.ohio.gov/Consumer/OCS/CompleteGuides/CompleteLifeGuide.pdf
http://www.usa.gov/topics/health/insurance/disability-life.shtml
http://money.msn.com/health-and-life-insurance/article.aspx?post=b722170d-637a-4a33-bfc8-3eb88e053bbd

Factors To Consider When Buying Life Insurance

According to J.D. Power and Associates, approximately four out of ten adults in the United States lack life insurance, and over 50 million adults may not have enough life insurance. Life insurance will provide a named beneficiary with a sum of cash in the event of the insured’s death, so purchasing life insurance is a sound way to ensure that the financial needs of a surviving spouse or other family members are met. However, when it comes to purchasing life insurance, many people struggle to determine how much coverage they really need. According toUSA.gov, a person’s needs for life insurance will vary over the years, so determining how much coverage and what type of coverage can be difficult to do. By focusing on a few key factors, however, you can more easily make a decision that is right for you.

The Different Types of Coverage
One of the first things that you need to do when purchasing life insurance is to compare the different types of coverage available. According to the Ohio Department of Insurance, there are two main types of coverage, and these are term life and whole or cash value life insurance. Each of these policies has unique benefits, and these policies may be combined together to fully take advantage of the benefits each offers. A cash value policy generally is more expensive, but it may be considered as an investment because it can accumulate cash value over time. This type of policy may never expire, so it can provide lifelong benefits. A term policy, on the other hand, will expire after a set number of years. Common term lengths are 10, 20 and 30 years. This is a more affordable option to consider, but it will not accumulate cash value.

Individual Goals
After understanding what type of coverage is available, it is then necessary to analyze individual goals for a life insurance policy. The most common reason why life insurance is purchased is to provide death benefits to a named beneficiary. However, the needs that a beneficiary may have for financial assistance after the loss of a loved one may vary over time. For example, a newly married couple without kids may have minimal needs now, but when kids are married, their needs for life insurance may increase significantly. When the kids leave and the couple has gained financial security in their later years, the need for life insurance may decrease again. In addition to financial support for loved ones, life insurance may be purchased to provide a legacy to heirs, to accrue cash value for a specific purpose or for other needs. For many people, a combination of goals may be present.

Premium Cost
A life insurance premium is commonly paid on a monthly basis, but it may also be paid quarterly semi-annually or annually. The cost of the premium should be considered when buying life insurance. While life insurance may be purchased to accomplish certain goals, it also should be affordable for the present-day budget. Because cash value policies may be more expensive, many people may find it advantageous to purchase a term life policy that covers at least a portion of their coverage needs, as this can keep the overall premium cost low. A second cash value policy may be purchased to provide the insured with lifelong or longer term coverage needs.

Policy Value
Analyzing an individual’s need for coverage often includes analyzing their current budget, projecting a future budget and planning for the future. Death benefits may be used to pay off existing debts, and this may reduce a family’s overall monthly expenses. They may also be used to replace lost wages experienced upon the death of the insured. As a final note, the funds may be invested in an income-producing investment, such as real estate, an annuity or stocks with a high-yield dividend. With income-producing investments, the lump sum of the life insurance may not need to be touched, but the death benefits should be sufficient to produce the amount of income the family will need. Analyzing how the family’s budget may be affected if a loved one passes away is an important step to take, as this step will show how much life insurance may be needed. This is a far more accurate way to determine needs than using an online life insurance calculator.

Needs Will Vary Over Time
It is important to note that life insurance needs will vary over time. Factors related to the family’s need for cash if a loved one passes away should be considered, but long-term plans should also be analyzed. Adding a child to the family, for example, will change the monthly need for income as well as long-term plans. This may be due to the need to pay for a child’s wedding, college education, first car and other major expenses over the years. In addition, over the years, the family may accrue more debts or pay debt balances off. Furthermore, retirement account balances and other financial assets may increase in value. These are all factors that can change drastically over time, and they can change the need for life insurance.

It is important for adults to review their life insurance coverage every few years to ensure that they have adequate coverage. The first step should be to review financial needs and future financial plans individually. Then, an individual or couple may meet with an insurance broker to explore the cost of insurance and to find a combination of term and whole life insurance that may meet their needs.

Source:

http://www.jdpower.com/content/detail.htm?jdpaArticleId=346
http://www.kiplinger.com/article/insurance/T034-C000-S002-how-much-life-insurance-do-you-need.html
http://www.usa.gov/topics/health/insurance/disability-life.shtml
http://www.usa.gov/topics/health/insurance/disability-life.shtml
http://www.insurance.ohio.gov/Consumer/OCS/CompleteGuides/CompleteLifeGuide.pdf

Fact Check: The Top 9 Myths About Life Insurance

Life insurance is easily one of the most popular and desirable liability policies on the market but, as with any popular financial product, it’s plagued by a number of myths and misconceptions. These myths can actually end up costing consumers a significant amount of money if they don’t take the time to dispel them, so it’s a good idea to do a fair amount of research before settling on a given life insurance product, or choosing whether to buy life insurance at all. Of all the common misconceptions about life insurance, nine of them are particularly costly and wrong, but easily explained.

1. A Life Insurance Policy Should Be Twice an Annual Salary

Most consumers shop for life insurance products with the belief that their policy should only cover expenses that amount to twice their annual salary. While this is a good starting point, and it may work for some buyers, it’s not a universal rule and it may lead to a significant underinsurance problem after the insured has passed away. Remember that the insurance policy must cover all financial obligations, funeral expenses, and other miscellaneous expenses that may be encountered by family members and the executor. This often requires a larger policy.

2. Single People Don’t Really Need Life Insurance Coverage

A large number of single individuals are convinced that they don’t need life insurance coverage, as they have no dependents or spouse to support in the event of their death. Single people, though, have financial obligations just like everyone else. They will also cost surviving family members or an executor a significant sum of money in burial costs and funeral expenses. While a very large policy may not be required, a life insurance product is still the best way to eliminate or offset these expenses for single people.

3. An Employer-Subsidized Term Life is Sufficient

For those making lower incomes, with relatively few financial obligations and potentially no spouse or dependents, this myth might be true. The problem, however, is that it takes a very limited and rare set of circumstances for that to be the case. Even single, lower-income individuals must often supplement their employer’s term life coverage with a more robust, financially beneficial liability product.

4. Life Insurance is Only Needed by the Head of Household

Everyone dies. It may sound morbid and pessimistic, but it’s the truth. Another thing that is almost universally true is that everyone who dies will have expenses, debts, and other obligations that are best dealt with by a life insurance policy. While the head of household may require a more substantial life insurance policy than others, the truth is that everyone in the home should buy or be covered by a life insurance product that will reimburse funeral expenses, unpaid debts, and other costs.

5. Investments are a Better Option for my Heirs than a Life Insurance Policy

In a fraction of one percent of cases, this myth could plausibly be true. For it to be true, however, the amount of any investments held would have to at least break even with assets, debts, financial obligations, and eventual funeral costs. That’s a significant sum of money, and it’s largely impractical. Investing is a good way to build a nest egg, but insurance is the single best way to ensure that future generations can enjoy that nest egg in the form of an inheritance, rather than an expense account for funeral costs and other obligations.

6. Life Insurance is a Burdensome Financial Obligation

There seems to be a perception among some consumers that life insurance represents a significant additional cost, perhaps because of the large amount of coverage offered by these policies. Due to the long-term nature of life insurance policies, though, this is actually not true. Life insurance is often one of the cheapest liability products available, with some of the highest coverage levels and payouts in the industry. Some policies even cost less than $20 per month, making them easily affordable even for low-income earners.

7. Bad Health Will Make Life Insurance Impossible to Obtain

This is not true, though many life insurance companies will charge slightly higher premiums to compensate for the added risk of insuring someone in less-than-idea health. Even so, these policies remain highly affordable and they are no more difficult to get than the policies offered to very young, very healthy people. All it takes is a skilled agent, an honest approach, and persistence.

8. Life Insurance Premiums are Deductible

This is only true for business owners and those who are self-employed, as their life insurance coverage premiums can be deducted from tax returns if they’re used to insure a business. For all others, though, this is simply not true. Life insurance premiums are not currently deductible as part of any federal or state tax relief program, and that isn’t likely to change in the very near future. Be sure not to rely on the hope of this deduction when incurring the monthly cost of a life insurance product.

9. Young People Don’t Need Life Insurance Policies

A person’s age does not generally determine when they die. It’s a good indicator of a person’s potential longevity, but it’s not a certain calculation. The truth is that people can die at any time, and their financial obligations will need to be met whether they’re 25 or 95. Young people in a stable profession with the means to purchase life insurance should do so as soon as possible.

With a Better Understanding, Life Insurance Makes More Sense

Dispelling the nine most common myths about life insurance is a good way to show who benefits most from coverage. Those who have significant financial obligations, dependents, or even those who are single, should waste no time in finding a robust, affordable policy that works for them both in the near-term and for the longer-term future.

Children’s Life Insurance Debates

New parents learn quickly that life insurance is very important to start when they have a baby. Most parents look at policies that will increase in value or have cash values so that they are saving for their children as well as covering them. Life insurance policies are positive steps to take when parents bring home a new baby from the hospital.

Term life insurance:

Parents can purchase a term life policy for their children starting on the day they are born. These policies are usually in $5000 dollar increments. Term life policies are set up for a limited amount of time. Each month the payment is made and the policy does not decrease as time goes by. After a term of 6 months, one year, five years all the way to 30 years, the insured has the chance to reinstate the same policy. Sometimes the rates increase when a new policy is issued. Term life insurance is one of the cheapest ways to insure a child.

Term life insurance does not increase in value or collect a cash value. A policy for children starting out is usually smaller but parents want to make sure they have coverage. Each child in a family will have a separate policy covering them. Parents can do a group policy that has individual names on the policies.

Whole life policies:

Some parents choose whole life policies so that they can build up cash value over the years of coverage. Parents want to do what is right for their children by protecting them in case of accidental death. The benefits in the policy will cover the child in case of unfortunate death and cover the parents as well.

Whole life policies are the type of policies one keeps permanently. With whole life policies, only part of the premium is paying for insurance. The rest of the payment goes into a cash value or investing. This type of policy is great to start when a newborn comes into the world. Some parents take out policies for their child when they are born and continue to carry the policy until the child reaches 21 years of age. After this, the parents usually let the young adult take over the policy or the parents continue to pay.

Some parents feel whole life insurance is a waste of money. Many parents feel that purchasing insurance when a child is young is a waste because they do not feel like they will need the insurance for a long time. Parents that purchase whole life insurance when the child is young are guaranteed that the child will have insurance when they are older. It is much harder to get insurance when someone is old. Older adults have health issues that sometimes keep them from getting life insurance at a reasonable rate so purchasing when they are babies helps guarantee coverage.

Life insurance through school system:

Some schools offer parents the opportunity to participate in a group policy that provides life insurance and health insurance to children at a reduced rate. Some financial advisors feel life insurance is a waste of money and others agree with parents that purchase insurance for their child.

Statistically Speaking:

According to consumer reports, only 15% of families with children that are under the age of 18 do not have insurance coverage. People are having difficulties paying the premiums and 22% of the parents with children that live at home say they do not have insurance because they cannot afford to pay for the insurance. The government helps children with affordable health insurance but does not help parents to purchase life insurance for children. http://www.ehow.com/about_5432403_government-health-insurance-children.html explains how the government covers children with health insurance and dental insurance with a small out of pocket cost but does not cover children with life insurance. The government should look at coverage for children because parents that lose a child are unable to pay for burial. The government will be responsible for the burial of a child in this case.

The average amount of coverage was around $255,000 in 2006. Since that time, policies have not decreased or increased and about 95 million adults are presently without life insurance coverage. On an average, the male in a household carries the higher amount of insurance because they are the ones who pay most of the bills. Women in families carry smaller policies averaging about half what the man carries. Children carry the least in insurance policy coverage.

Children’s Plans:

Most parents can start a plan for an infant for pennies on the dollar. Most of the policies that cover children will allow parents to purchase life insurance for their infants and increase the coverage at any time. Grandparents will also take out policies for their grand kids as a love gift.

Parents can add their newborn or children onto their own policies as a kid rider. The rider will remain on the parent’s insurance policy until the child reaches age of 18. This plan is not separate from the parents and the child will not be able to continue this same policy after age 18. This type of coverage is usually inexpensive for the parents.

Is insurance a Good Idea?

Insurance coverage is always a good idea. Some parents believe it is better to begin a savings plan for their child. Other parents feel that a life insurance policy is a good investment, especially if the parent takes out a whole life policy with cash value building. Parents that wish to pay smaller premiums find term life policies to be the best way to go. Whatever policy type the parent chooses, they will feel more secure knowing that their child is covered in case of any accidental death. No one expects anything to happen to their child but we see on the news every day that sometimes the unexpected happens to our lives and the ones we love.

Learn About The Different Types Of Life Insurance

There are many forms of life insurance policies. It is important that individuals find the right type of life insurance policy for their families. Life insurance policies require holders to make monthly payments called premium for the policy to be legally effective. Since there are many forms of life insurance policies with varying premium rates and payments at times of death, people should contact an unbiased financial planner before making their life insurance decisions.

Term Insurance
This is the ideal policy for those who want an affordable life insurance policy. One can get a quote from insurance agent or broker. When choosing a term insurance policy, look at insurance premium costs as well as the amount of benefits the beneficiaries will receive. Applicants are required to undergo a full physical examination to be approved by an insurance underwriter who will also ask the applicants questions about their medical history.

Term insurance policies provide cover for specific periods. The term can vary from 1-20 years depending on the policy. During the cover period, beneficiaries are entitled to receive certain death benefits in case the policyholder passes away. Failure to pay premiums results in the cancellation of the policy before the end of its term. Because insurance companies bet that holders will not die during the term, this policy has affordable insurance premiums because of lower risk to the company.

Term insurance policy expires when the specified term of the policy ends. Beneficiaries receive nothing at that point. However, there are two options available to holders once their policies expire. They can renew the policy for another term or convert the policy into permanent life insurance policy. In case a policyholder decides to renew the policy, premiums are going to be higher because risk of death increases as the holder ages. Term insurance policy cannot be renewed once an individual reaches a certain age.

In case the policy is converted into permanent life insurance policy, the amount covered will be the same but will have higher premiums. However, holders will be able to keep their policies regardless of age or health issues as long as they continue to pay premiums. The policy must be converted before it expires.

Whole Life Insurance Policy
This is a traditional life insurance policy sold by all insurance companies. The plan provides financial security for families if the policyholder passes away prematurely. Various benefits accrue to whole life insurance policyholders including tax advantages that can significantly increase death benefits.

Whole life insurance policy is an example of a permanent life insurance plan. The plan provides insurance cover to holders throughout their lifetimes. Insurance companies charge premiums to provide coverage. The policy provides policyholders guaranteed value while the policy is in force. Once the policy has been issued, face amount, premium rates and rate of return will remain unchanged.

A notable advantage of whole life policies is that they have a savings component known as cash value account. Policy owners are guaranteed a certain rate of return on their investments, which makes the policy gain value with time. The amount of money credited into the cash value accounts increases as the performance of the investment improves. The account is tax-deferred. This means the money in the account grows with interest tax-free until it is withdrawn.

Other benefits of having a whole life policy include the fact that policy owners can access money from their policies through loans. The loan money is received tax-free. Policyholders can use such loans to pay for emergencies, buy a car or a house and fund their retirement. Investors with whole life policies on a participating plan i.e. can share in the profits of the insurance company, can receive dividends. However, this is not a guaranteed incentive because it is determined by the performance of the company.

Premiums are determined by insurance companies based on information submitted by applicants. Some of the factors considered in setting the premium rate include age, gender, occupation, coverage amount and health status. Insurance companies may require medical exams if coverage amount is high. The results of the medical exam will determine the premium rates and in certain instances, coverage may be denied altogether.

Variable Life Insurance Policy
Variable life insurance policy is a unique life insurance policy. Its cash value increases with the performance of the investment. There are distinct differences between ordinary and variable life insurance policies. With the ordinary life insurance policy, premiums are collected from those who collect the policy. The premium collected is then invested with the promise to pay beneficiaries certain sums of money upon the death of policyholders.

In variable insurance cover, policyholders can allocate part of their premiums to be invested on other instruments such as bonds, investment funds and stocks. Variable life insurance policies provide permanent protection for the deceased family. Beneficiaries can continually draw on the returns of the investment without touching the principal if the investment continues performing well.

Universal Life Insurance Policy
There are distinct differences between universal life insurance policies and other life insurance policies. For instance, whole life insurance policies focus on death benefit amounts while universal life insurance policies accrue interest based on interest rates in the market. The returns on interest are then added to the policy’s cash value. However, portions of the premium payment are set aside to cater for cost of insurance cover and other fees charged by the insurance company.

Universal life insurance policies are flexible and affordable. They have various benefits including:
• Withdrawals from the policy’s cash value with no penalty fees attached.
• Policyholders can apply Additional premiums at any time.
• Changeable death benefit amounts.

Resources
http://www.finweb.com/loans/borrowing-from-your-life-insurance.html
http://www.compuquotes.com/whole-life-insurance/faq.html
http://www.law.cornell.edu/wex/universal_life_insurance
http://pubs.ext.vt.edu/354/354-146/354-146.html
http://www.insurance.oregon.gov/consumer/life-insurance/understand_life-2a.html
http://www.lifeinsuranceadvisors.com/resources.html

What Consumers Need To Know About Life Insurance

Buying life insurance is a big decision to make. This is especially true for younger people who are not very concerned about it. Later, they often realize how valuable life insurance can be. There are actually a number of reasons why an individual should get a life insurance policy.

Why buy life insurance?

• Financial Protection for Dependents

When an insured person passes away, dependents do not have to worry about the expenses that could run up to tens of thousands of dollars. Life insurance can replace the deceased person’s lost income. With this, the family can enjoy a comfortable life even without the breadwinner.

• Pay Off Debts

Life insurance also provides funds for the living family members to pay off debts such as mortgages. With this, they do not have to sell the house to pay it off. In addition, they will still continue to receive income to cover their daily living expenses.

• Pay Off Estate Taxes

Life insurance can pay hefty estate taxes. This is especially true with permanent life insurance that ensures end of life coverage. With this, the insured will never compromise their assets and retirement funds.

• Purchase Business Partner’s Shares

Life insurance for business partners is also essential. When the insured partner dies, the other partner will have sufficient funds to buy interests from their heirs and pay for shares in the company without the need to sell the company itself.

How much coverage is needed?

Individuals should purchase insurance coverage with a face amount that is sufficient enough to replace the after-tax income they could have earned if they had lived a full life. This may also depend on the premiums that a peron can afford based on their present and future income, existing budget for premiums and the family’s special needs. The right amount of coverage should allow the dependents to continue living the life they used to have when the insured family member was still alive.

What type of insurance policy should I purchase?

There are two basic types of insurance policy that individuals can choose from. This includes term and whole life insurance. It is important that consumers get to know the pros and cons of choosing any of these policies. Doing so allows them to get the most out of every dollar paid for the policy.

• Whole Life Insurance

Whole life insurance is also called permanent insurance. This means it does not expire and provides lifetime protection. Generally, it comes with an investment component. However, the premiums are a lot higher than with term policies. What makes whole life policies preferable for many consumers is that the premium rate remains the same constantly. The insured doesn’t have to worry about fluctuating rates. In addition, it comes with a fixed interest rate with its investment component that may be in the form of bonds, mutual funds or money market securities.

Moreover, whole life insurance has a cash value. The insured can borrow against the policy. A whole life insurance policy is tax-free unless the insured starts withdrawing funds. Other types of permanent insurance include variable life and universal life. The main difference between universal life and whole life is the separation of investment and death benefits. Universal life insurance allows the policy holder to gain a higher cash value at a faster rate from equity investments. Additionally, universal life is flexible. Policy holders can change their death benefits and premiums so that they can keep up with them.

• Term Life Insurance

Term life insurance provides coverage and protection for a specified period of time provided the policy holder pays the monthly premiums. It does not have an investment component. The term is renewable annually. However, there is no need for the insured to go through the same process they did when they first applied for the policy.

If the insured dies, the beneficiary receives the policy’s face value from the term insurance policy. Terms can range from one, five, ten to 20 years or more. When the term ends, the policy expires unless renewed. Term life insurance policies are more affordable than permanent life insurance. However, they only provide temporary protection without cash value. Nevertheless, policy holders may convert their coverage to permanent life insurance.

How to Buy Life Insurance

According to http://www.usa.gov/topics/money/insurance/tips.shtml, consumers should be cautious when choosing the type of insurance policy and the company where they buy it from.

Basically, they should contact their state insurance department for information related to insurance companies and their rates. This is the best way to get some idea of the rates currently available within the state and find the provider that offers the lowest cost.

In addition, consumers should check with different providers in order to get the best deals. Get quotes from different insurance companies. The government warns consumers to be aware of the many online services offered as they may only provide rates from few companies. It is smarter to choose an independent insurance agent that works with different insurance providers in the area.

Most importantly, the insurance provider should be fully licensed and covered by the state’s guaranty fund. The state insurance department can guide consumers in finding these companies. Choosing a company with this feature ensures policy holders that they will be able to file a claim and receive funds even if the company defaults. They should also check the company’s financial soundness and stability. The government recommends sites like Moody’s Investors Services, A.M. Best and Standard and Poor’s to check the insurance company’s ratings.

The National Association of Insurance Commissioners’ site provides complete information regarding complaints filed against insurance companies. The organization is affiliated with the state insurance department and delivers updated and reliable information.

The government also reminds consumers to make sure that they receive a written policy. This is especially true after they make the first payment for their insurance premium. Doing so allows them to ensure that the agent has forwarded the payment to the insurance provider.