Your Life Insurance Guide Starts Here!
Need a little help before filling out a quote? Here is your personal life insurance beginners guide. Shopping for the most appropriate life insurance policy is overwhelming. Our guide will provide you a basic understanding on what you need.
- Chapter I: Getting Started
- Chapter II: Find Out The Amount Of Life Insurance You Will Need
- Chapter III: Do You Know What Is The Right Kind of Life Insurance for YOU?
Getting Started: Here are 3 Introductory Steps to getting the right Life Insurance for you:
Step 1 is deciding on the amount of life insurance you will need.
Step 2 is calculating how long you will need coverage.
Step 3 is finding out how much life insurance you can afford to purchase.
Please remember that the main reason to purchase life insurance. It is to provide financial coverage of an untimely or unexpected death. Your life insurance policy may also provide one of several ways you can plan for your future. For example, should you use life insurance as an investment?
Now you need to know what types of life insurance policies will address your financial needs and choose the policy that suits you most appropriately.
How do you choose?
You need to select your combinations of premium and life insurance benefits. For example, a policy that puts an emphasis on financial protection in the event you should pass away -or- benefits in case you are blessed with a long healthy life – or- a combination of the two.
Seeking help from an independent life insurance agent is key.
Your life insurance guide should be an independent life insurance agent. Independent life insurance agents like us are able to shop your situation to multiple companies to find you the best solution at the best price. They aren’t handcuffed to one company which will severely limit your options.
Do you have a policy now?
Are you looking to add on or replace coverage? Review these 9 tips!
- Do not drop your current life insurance policy without considering the following information.
- Do not cancel your original life insurance policy until you received your your new policy.
- You now get a minimum period in order to review the new policy. You get to decide if your new policy is what you wanted.
- Your policy may be expensive to replace.
- The majority of your early payments went to the insurance company’s issuing and selling the policy.
- This happens all over again when purchasing a new policy.
- You will also want to communicate with you tax advisor how dropping your life insurance policy may affect your income taxes.
- Your premiums will typically be higher if your health has changed or you’re older. If you aren’t insurable or can’t pass underwriting, you won’t be able to purchase a new policy.
- Your policy may not pay out benefits at the beginning for certain types of death (such as suicide).
How Much Life Insurance Do You Need?
You need to take some time calculating your life insurance needs. A great place to start is with our life insurance calculator. This calculator will provide you a great idea of how much life insurance you may need.
Next, ask yourself the following 6 questions:
- Do I provide the majority of my family’s income? How much do I provide to the family? How would my children and dependents get by if I were to pass away early?
- Who else depends on my financial support (sibling, parent, or grandparent)?
- In the event of my death, do I have enough savings for my children’s education?
- Will my family be able to pay debts and funeral costs if I were to pass away?
- Would I want to leave money to one or several organizations?
- Are there additional family members that I’d like to leave money to?
Calculating these questions and finding out what you currently have to meet these needs is very important. You also need to factor in any life insurance you currently have.
This would include group insurance through an employer or veteran’s insurance. Social Security and pension plan benefits for survivors need to calculated as well. Assets such as investments, personal property, savings, and real estate need to be added too.
Do You Know What Is The Right Kind of Life Insurance for YOU?
Life insurance policies aren’t all the same. There are policies that provide you coverage for only a certain time and others that provide coverage for your entire life.
There are policies that build cash values and there are some that do not. Some life policies will allow you to change from one type of life insurance to another type.
There are even some that are a combination of the different kinds of life insurance. There are policies that have benefits while you are living.
It all boils down to what are your needs and what can you afford.
Life Insurance Types
The basic kinds of life insurance are permanent (cash value) and term insurance. Term life insurance typically will have a lower premium early on, however it will not build cash value for future use.
You have the opportunity by combining permanent life insurance with term. This can be for the time period for your highest need for insurance to replace your income.
Your Term Life Insurance
If you choose term life insurance, it will cover you for a set period of time (one or more years). The death benefit will be paid out only if you were to pass during the term period.
Generally speaking, term life insurance will offer the most insurance protection for the amount of premium dollar paid. Term typically will not build a cash value.
You are able to renew your term policy most of the times for 1 or more terms. This can happen even when your health status has changed.
You must be aware that your premiums may increase for every renewal of your policy. Find out what your premium will increase to if you plan on renewing your life policy.
You should also find out if your renewal rights will be lost at a certain age. There are some life insurance companies that will provide you the right to have the policy in force for a higher premium.
This will make it an inforce guarantee for a period of time for the same price every year. When this period ends, a physical examination may need to be passed in order for your coverage to continue. Your premiums may increase as well.
You may have a conversion option for your term life policy. This would allow you to trade in your term policy in for a permanent (cash value) policy within your conversion timeframe (even if you are unhealthy). Your premiums will increase.
Your Permanent (Cash Value) Life Insurance
Cash Value life insurance is more expensive than term life insurance at the beginning when comparing the same amount of insurance. The portion of your life insurance premiums that are not applied to the cost of insurance are used to invest by the life insurance company. This will then build a cash value which can be used in several ways.
You can take a policy loan out by borrowing against the cash value of your policy. What would happen if you didn’t pay the loan back?
Whatever amount that you owed would be taken away from the death benefit after your death -or- taken from your cash value if you were to cease payments on your premiums and withdraw the remaining cash value.
You may want to use your cash value to provide you with more income in your retirement years. You can use it for other needs like a school tuition. You must understand, that to build your cash value, higher premiums at the beginning years will have to be paid.
Your Life Insurance Guide was made to provide you with some information to learn from as well as elicit some questions and answers about your personal situation.
If you have any questions about your life insurance needs or about “Your Life Insurance Guide” please contact us today.