10 Things You Must Know About Life Insurance

Life insurance is a crucial part of personal finance- one that deserves consideration by every household. However, despite the fact that life is insurance is almost universally applicable, there remains a great amount of confusion and even skepticism over this very important decision.

Here are 10 important things to consider when making a decision regarding life insurance.

  1. If anyone relies on you financially, you need life insurance.

Life insurance is basically obligatory if you have a spouse or dependent children. You may also require life insurance if you are someone’s ex-spouse, life partner, a child of dependent parents, the sibling of a dependent adult, an employee, an employer or a business partner. If you are retired, financially stable, and no one would be affected by your passing, then you may not need it.

  1. Life insurance does not simply add monetary value to a person’s life.

Instead, it helps to compensate for the inevitable circumstances that accompany the loss of life. It helps those left behind to cover final costs, mortgages, outstanding debts, and lost incomes. But most importantly, life insurance can help lessen the burden on family members who already grieving the loss of a loved one.  This is why life insurance is vital to the breadwinner of all single-income households.

  1. Life insurance is a contract.

A policy is a contract between a person and the insurance company. The insurance company pools the premiums of policyholders and pays out claims—called a death benefit—in the event of a death. The difference between the premiums taken in and the claims paid out is the insurance company’s profit.

  1. There are 4 roles in a life insurance policy.

These roles are the insurer, the owner, the insured and the beneficiary. The insurer is the company, responsible for paying out claims in the case of a death. The owner of the policy is responsible for paying the premium payments. The insured is the person whose life the policy is based on. The beneficiary is the person who receives the claim in the event of the insured person passing.

  1. Life insurance is a risk management tool, not an investment.

Although some policies can offer a tax incentive, it is not wise to view a policy as an investment. If you haven’t made an emergency cash reserve, paid off your mortgage, and maxed out your 401 K, then there are smarter places for you to making an investment and you should look into a policy that does not have an investment component.

  1. There are two types: term and permanent

Term life is least expensive, simplest, and most widely available. With this type, the insurance company bases the premium on the probability that the insured will die within a stated term, whether that’s 10, 20, or 30 years. They are guaranteed for the length of that  term. If you let this policy lapse, you can lose coverage and often be obligated to continue paying your premium.

Permanent life insurance is also based on probabilities, but has a “cash value” that is designed to keep the policy going in perpetuity. It has further options such as whole life, variable life, or universal life, each with specific tailored to different situations. These policies are often used to cover business planning or independent financial situations.

  1. Life insurance can be extremely expensive or extremely affordable.

If you apply for all of the bells and whistles of a life insurance policy, you will be looking at a hefty price tag. However, most people are pleasantly surprised with the premiums for a plain-vanilla policy. A healthy, non-smoking, 30-something male, for example, might pay less than $500 per year for a 20-year term policy with a million dollar death benefit.

  1. Determining the Best Option For You Doesn’t Have to Be Hard

Many people fall into a trap where they do not purchase life insurance because they are intimidated or they do not understand all of their options, so they push off the decision. In the vast majority of situations, most families would be fine if the policy paid out simply enough to replace the income of the person passing. The important thing is that you do not avoid life insurance because of its complexity.

  1. Consider Using A Live Person

A live insurance agent is your best option for custom-tailored policies and premiums. Our agents have considerable experience in this area, and are able to give you the coverage and price point that you feel confident in.

  1. Know Your Options When Cancelling

If you have a policy that isn’t appropriate for you, proceed with caution. Don’t cancel your existing policy before your new one is in place. If you have a term policy you no longer want, you can contact your company to cease coverage and cease payments. If you have a permanent policy, you will want to examine the tax consequences before you cash it in.
Life insurance is a very valuable tool for your long-term and comprehensive financial future plan. The BeneChoice Companies are proud to be a resource for all of your insurance needs.

Highest regards,

Stacia

Source

[USM_plus_form]