What is Life Insurance?
Life insurance is the agreement between an insurance company contract and you. Basically, in return for your premium payments, the insurance company pays your next of kin/beneficiaries under the agreement a lump sum known as a death benefit after your demise.
The money could be used to pay daily bills, pay off a mortgage, or place your kid in college, pay funeral costs and other end-of-life expenses, set off debts, settle taxes, or even charitable contributions.
What Does Life Insurance Cover?
Life insurances cover death by natural causes, in which case your life insurance would apply and your dependents would claim the death benefit. It also covers your unintended Death, in cases of poisoning, accidental overdose, a car accident, or any other unfortunate occurrence that may lead to your demise.
Types of Life Insurance Coverages
Life insurance policies come in two types—Term Insurance Policy and Whole Life Insurance/Permanent Insurance.
Term insurance is more popular and affordable (71% of life insurances buyers opt for this!) because it only covers a specific period set within the agreement. This period often ranges from as much as 10, 15, 20, up to even 30 years.
Beneficiaries can file a claim and collect tax-free benefits from the insurance company after the insurance holder’s demise. Plus, you can also extend your agreement yearly after your term insurance has expired by paying what is called guaranteed renewability.
Whole Life Insurance on the other hand is ‘for life.’ It’s more costly than life term insurance because they endure for a lifetime. This kind of insurance, though, comes in different names. It’s also called universal insurance, permanent insurance, variable universal insurance. Whole life insurance covers you from when you sign the dotted lines till your demise. It’s recommended that you buy it when you’re young so it could build in cash value. Whole life also disburses dividends that you can use to subsidize your premiums.
How much is Life Insurance?
A lot of factors go into calculating how much your life insurance may be worth—from your gender to your age, the amount of death benefit you may intend for your beneficiary to receive, the type of life insurance, your job, your health, and the kind of lifestyle you lead.
That being said, the average monthly cost of life insurance is $126 for a 20-year term policy with a $5000 death benefit. This is just a guideline; your prices will vary based on your age, the insurance company, and other factors (as we have earlier mentioned
Tips For Purchasing Your Life Insurance
Besides the very obvious steps to take when shopping for a good life insurance policy like comparing quotes and rates online or in person. You might want to take stock of the following:
— Life insurance rates
Rates could be standard or preferred. Preferred rates are for extremely healthy individuals who have provided their medical information/bio-data to back up their claims. Preferred rates save your quoted premium up to a whopping 30-35%.
Standard life insurance rates are more common, with only a few making the ‘preferred rates’ cut.
— Overall Background Check
You also want to review the profile of your life insurance broker, to see if you trust them. One sure-fire way is to vet their reputation, financial stability to make sure they have a positive history with their previous clients.
— Criteria for renewal
After the first premium is established, the duration of the insurance is generally guaranteed (often 10 or 20 years). But what happens at the end of the policy? Most plans are renewable till you are 70 or 75. So don’t forget to question your broker if you need new medicals to continue your insurance.
— Confirm that cancelation of the policy is without penalty
Most life insurance plans may be canceled without a penalty at any time. Ensure that the life insurance provider has any unique cancelation policies with your broker.
— Inquire about potential policy restrictions in case of a switch
Your insurance needs may take a new turn as your life unfolds, thus leaving you with the need to switch. Make sure there are no penalties associates with it.
How to save money on Life Insurance
It’s worth your time and wallet to search online to unpack the best value for money when scouting life insurance policies. Here are a few how-tos:
— Compare quotes & rates:
When it comes to the ability to instantly compare an ocean of life insurance offerings, nothing beats the internet. Online, you can get the best bang for your bucks (in premiums) without spending too much. So, instead of interfacing with insurance agents who’re more interested in closing the sale rather than helping you meet your needs, user-friendly insurance company websites give you the opportunity to ‘be your own agent’.
Have your ‘medicals’ on standby
Proof of (annual) health checkups indicating that you lead a healthy lifestyle go a long way in getting you cheaper term life insurance quotes. In cases where you’re a chain-smoker who’s kicked off the habit, you’re open to re-negotiating a decrease in your insurance rates.
— Research your Insurance Company.
Some insurance companies offer a slight discount provided you have your insurance payments automated (from your bank account). Even more insurance companies provide considerable discounts for every increase in insurance coverage. Make sure you compare the prices between quantities like $250,000, $500,000, or more.
— Age
The rule of thumb is that term life policies are cheaper when you’re young. So, dear youngling (and young-at-hearts.) You might not get a better time to get that insurance policy than now! 🙂
— Medical Improvements/Surgical Procedure
If you’ve ever had any kind of surgical treatment to address a severe medical problem. You may be able to negotiate a reduced life rate based on how long your operation has taken place.
Final Touches
Unless you have an elixir of immortality, we’ll all leave this earth someday. We all need life insurance, and navigating the murky waters of securing a life insurance policy takes equal part ‘effort’ and ‘expertise’. It’s easy to get lost while trying to make sense of the terminologies and concepts when shopping for the right coverage.
With this starter course, we trust that you’ll be able to find the most value when shopping for life insurance coverage for you and your family.
