Choosing Life Insurance
Choosing a life insurance policy may seem overwhelmingly confusing until you put the selection process into three very basic categories: need and products that meet the need coupled with your insurance budget.
Discovering Your Life Insurance Needs
Discussing the event of death, especially your own, can be difficult but a well planned insurance estate lessens both financial and bookkeeping burdens on those that will already be succumbed to grief in your passing.
To discover your life insurance needs you must first explore your life insurance purpose. Is the purpose of life insurance to lessen the burden of burial expense? Is your intention to cover burial expenses and allocate enough funding to your estate for unresolved debt left behind? Do you have a dependant spouse and /or children whose ongoing care you would want to allocate funding for? Maybe you want to provide for the education of children or grandchildren. Sometimes life insurance is mandatory as part of a start business or larger loan. Your life insurance needs are the life insurance products that sufficiently compensate your will to your loved ones in the event of your death.
Life insurance is a critical module of life and finding the right life insurance to cover your needs at a comfortable deduction from wallet is called peace of mind.
Determine a Life Insurance Budget
Your life insurance plan must be cost effective in proportion to your budget. Neither insurance wealth but wallet poor or insurance poor and wallet locked make a good judgment plan for purchasing insurance. Determine your needs, your wants and what your budget allows to be allocated for insurance premiums.
Basic Product Knowledge
Basically life insurance falls under two main categories; whole life and term life but the cost associated with the coverage is based on risk or mortality tables. Gender plays a role in life expectancy as well as current age, health at present, past health issues, lifestyle, occupation and family medical history.
Whole Life
Whole Life Insurance covers one for the duration of life and often will require an initial medical exam. Whole life monthly premium contributions build a cash value asset and generally have an unchanging premium and death benefit. There are three basic types of whole life insurance products traditional whole life, single premium whole life and interest sensitive whole life.
Whole life insurance provides a tax benefit in that the asset is not taxed until it is used; however, only a portion of the premium converts to asset. Whole life is a minimal risk policy.
With traditional whole life there is a guaranteed fixed minimum cash value and with asset accumulation the premiums can be paid from acquired cash value. In the case of employment loss or inability to work which would hinder the ability to pay the whole life premiums the acquired asset will continue to pay policy premiums as long as there is an asset value.
Single premium whole life insurance is at the high end of the effective scale since the entire face value of the policy is paid in an upfront onetime payment. Cash value increases as “interest” payments on the initial investment are made. This type of policy has a fair amount of risk in that one makes a lifetime investment in a non liquid asset.
Interest- sensitive whole life is the highest risk whole life product because it is based on current market trends of interest rates and the cash value portion increases or decreases accordingly. In a good economy this product shows substantial asset gain and in opposition, loss of asset beyond the fixed cash value.
Most financial experts feel that whole life insurance is best for those who want absolute minimal risk and do not like the insecurity of converting assets into investments. However, experts also feel that whole life insurance may not provide enough of a return to secure comfortable retirement. Further, if premiums are not paid, the whole life insurance goes away, though one may be able to access the cash value portion.
Term Life Insurance
Term life insurance is as it suggests for a term which in a lesser translation means it exists as long as the premiums are paid. Term insurance premiums increase with the age of the insured and there is no asset value. The face value is paid to the beneficiary upon the insured’s death. Commonly a term insurance policy is paid annually.
In Summary
Choose a life insurance policy based on your individual needs and budget and get your quotes from a reputable company.
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