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Life Insurance Explained

In the world today money is the most essential necessity of an individual’s life. It is almost impossible to dwell without money. This is why a person tries to earn maximum possible during his lifetime to provide a decent living to himself and his family. But what if the sole earning member in a family dies? Who will provide financial aid to his family and how? Though there are quite a few answers to it such as will, leaving a legacy behind etc. But the best and foremost option meant for the high as well as the low is a life insurance policy. A life insurance policy as the name suggests not just insures your life but is also the smartest and the most far-sighted way to secure life of those whom you love.

Any individual can take a life insurance policy. In case of children, their parents are supposed to pay the premium. There are policies for different amount. The premium also varies accordingly. A life insurance policy for $50,000 will be charged higher than one for worth $25,000. But besides these the premium also depends on many other factors. The topmost is the age of the individual. A 70 year old man will be charge with a higher premium than a 30 year old individual. Also lesser quantity of risks will be covered in case of the former in comparison to the latter. Along with age the occupation and lifestyle of the policy taker also matters a lot. A person who throws his life into danger daily (for example one who is a sky-diver) will have to pay more premium than one leading a simple life. Moreover an alcoholic, heart patient etc. will find his life insurance policy to be more expensive than a strong and healthy individual of the same age.

It is always the choice of the individual which insurance policy to take and from where. This depends on the needs and aspirations of the individual. for instance a person who is supposed to be survived by 5-6 successors or beneficiaries, usually opts for a policy with a good sum o
f money.

Broadly there are 3 different forms of life insurance policies.

1. Whole life policy- this policy is one where the amount of premium the policy taker requires to pay does not alter with time. The amount of the premium id decided once at the time of taking the policy. This type of insurance enables the policy taker to have some cash-build up during his lifetime that can be either used during the course of the policy or after his death to increase the benefit.

2. Term life insurance begins with low premiums initially. the premium amount increases with the age of the person. since there is no cash build up in this policy, there are no chances of an increment in death
benefit.

3. Variable life policy is akin to the whole life policy i.e. the premium is fixed once and for all. The only difference here is that in this policy there should be cash build up as long as the various mutual funds the policy taker has opted for, do well.

Life Insurance Equals Peace Of Mind

No one likes to think about the consequences of death and its affects on those that we leave behind. It is however an indisputable fact that sooner or later we will all shuffle off our mortal coils, often without warning. When that time comes a life insurance policy will ensure the financial security of our loved ones in their grief, and will ultimately give each of us the peace of mind that our mortgage is paid off and our families taken care of when we die.

Life insurance these days is in fact fairly cheap to maintain. Increased competition in the life insurance marketplace, coupled with its ease of purchase over the Internet has bought premiums down to record low levels. You can now obtain a life insurance policy that pays a lump sum of £100,000 upon your death for as little as £5 per month.

How Much Insurance Do I Need?

Those that do decide to take the plunge and sign up for a life insurance policy though often struggle to decide how much insurance they should take out. As life premiums go up in line with increases in the sum insured, the ultimate insurance amount is often dictated by how much the person taking out the life insurance can afford to pay each month.

Then there is the thought of the mortgage. If we are still owing money on the mortgage when we depart this world, many of us would not want to see our loved ones struggle to meet the mortgage repayments each month. The amount of insurance taken out therefore should at least cover the cost of our mortgage, or what is left on the mortgage as it would be if a reducing term life product is purchased.

Protect Your Mortgage

In fact, many mortgage lenders these days insist that life cover is taken out to protect the mortgage repayments in the event of the owner’s death. On joint mortgage applications, a joint life policy is strongly recommended by lenders, and in some instances mortgage lenders will include a basic life policy in with their mortgage products that reduces in line with the outstanding amount to pay. However, life cover issued direct by mortgage lenders may not always be the cheapest insurance policy available. It therefore pays to shop around for life cover on the Internet as you may be able to save £15 or £20 on your insurance premiums each month.

Deciding on the amount of insurance coverage

So, how is it best to decide on the amount of insurance coverage? It varies for each family / individual, but in general you should take out a life policy not only to cover the cost of your mortgage but also to provide your family and dependants with a lump sum after you’ve gone. What lump sum you decide upon will depend on many factors, but it should at least cover the cost of your monthly household expenses minus the mortgage payments.

Life Insurance Coverage

The subject of life insurance can be a confusing one and we spend a lot of time discussing various ways to buy life insurance. How much do I need? How much will it cost? Will my beneficiaries have enough to live comfortably? What is the difference between cash-value and term life insurance? Which is the cheapest to buy?

CASH VALUE LIFE INSURANCE POLICIES

Cash value life insurance, such as universal and whole life, combine a death benefit and a tax deferred saving element. Occasionally referred to as permanent life insurance, these types of policies are intended to cover you for your lifetime.

Annual premiums for cash value policies generally are higher than those of term life policies as part of each premium pays for insurance and the remainder is invested. Cash value is what you can borrow from the policy or receive by surrendering it. These funds are ideal for retirement planning and college funding, among other goals, because they accumulate tax deferred until you withdraw them and then may be partially taxable. Loans and withdrawals will reduce the policies cash value and death benefit.

LIFE INSURANCE MADE EASY

Term life insurance is the most fundamental type of life insurance. You purchase insurance coverage for a designated period, from one to many years and the policy will provide a death benefit if you die during that period. Many polices let you renew your coverage for repeated terms until age 65 or even 100.

Term life insurance is popular with younger people because it provides the maximum amount of coverage for the lowest cost. Early premiums are low and increase as you become older. For example, a $250,000 death benefit will cost less in your 30s than it will in your 50s. For this reason, term life insurance is usually a better value for shorter term or finite life insurance needs.

Life Insurance Comparison Precious Advice

When you are ready to purchase a life insurance policy, you are advised to make a life insurance comparison. You should ensure that you are getting the best possible life insurance at the best possible rates. There are different types of life insurance policies available in market with different rates so you are recommended to spend a little time and gather valuable information of the various companies to get the best deal.

During a life insurance comparison, first you have to justify the type of life insurance policy you would like to prefer, whether it is a low cost term life insurance or a universal life insurance. There is a huge difference between these two life insurance policies. Term life insurance is meant only for a short span of time. In case you remain alive after that period, then the term life insurance policy needs to be renewed or you will need to purchase a new one. Whole life insurance or universal life insurance on the other hand lasts for your whole life.

There are lots of whole life insurance companies available online, and it is not difficult to compare the benefits of different online life insurance companies, their quotes etc. If you are in search of a term life insurance then you are advised to request for a minimum of three online term life insurance quotes to compare premiums and settlements offered by each of them.

When you are comparing life insurance policies, the most important aspect is to make a comparison of monthly premiums that you have to pay. The premium should be as low as possible and in case of universal life insurance, the premium depends upon the market conditions.

Only comparisons of premiums are not enough, you should also compare whole life insurance rates with term life insurance rates. The best method for comparison is free life insurance quote. If you are not confident it is advisable to seek help of a reliable insurance agent to get you the right policy.

Life Insurance Comparison: Term or Whole Life?

When it comes to buying life insurance the most important comparison is between term insurance and whole life. Here is an explanation of each.

A term life insurance plan provides life insurance – plain and simple. A whole life insurance plan provides life insurance but also accrues value, which you can cash out or borrow against. It generally takes about three years to see any value and then it’s not a lot of money. Term life insurance, in comparison to whole life, is considerably less costly for this reason. Some will refer to term life insurance as renting insurance rather than buying it. The reason for that attitude is that, much like auto insurance, you pay the premium each month or quarter or year to hedge against the bet that you might have an accident (in the case of term life insurance the accident is death). If you don’t have that accident, in the case of auto insurance, or if you don’t die in the case of life insurance, you don’t get the money.

We all die, of course, so it might seem that term life insurance is a good bet and the best bet in comparison to whole life. You would, you surmise, always get your money back. The catch here is that term life insurance will end at a certain point – and that point may well be before you are deceased. Term life insurance plans are only good until a certain predetermined age – many are 70 years of age, others up to 80. For those of us who really need this coverage until the day we die these aren’t good plans in comparison to whole life which will be in force until the day we die.

LifeInsuranceTerm life insurance is a good buy in comparison to whole life, however, if all you are trying to do is set money aside to prevent your young family from becoming destitute in the event of your unexpected death. Once you reach the age of 70, the likelihood is that your children will be comfortably on their own and not dependent on your money or income to survive. Of course, if this is your only life insurance and it goes away before you die then your family or someone else must bear the cost of burying you. That is where whole life insurance is a favorable comparison to term life. Whole life will stay in place as long as you do, and will be there when it comes time to pay for your burial.

It may be, then, that in doing a comparison between term life insurance and whole life insurance, the results indicate a need for both. Many professionals suggest that you buy an amount of term life insurance that would keep your family bills paid for a predetermined time in the event of your untimely death, choosing a term that covers them only until they are old enough to take care of their bills on their own. These same professionals suggest as well that you also buy a whole life insurance policy for an amount of $7000-$12,000, merely to assure that your family will have money to bury you.

In other words, if you are 40 and your children are 6, 8 and 10, you’re going to need about 15 years of term life insurance – until your youngest is through four years of college. You might decide, with three children and a spouse that you’ll need several hundred thousand dollars of coverage. A Whole life policy of $10,000, however, would be plenty to provide a decent funeral and burial.

Life Insurance Companies – Where To Start

As you moved past your twenties, and into the rest of your life, you probably started realizing that you were not invincible. Although few want to admit it, there will come a time when you die. When you have a family, you need to ensure they will be taken care of financially when this occurs. Life insurance companies can help you make arrangements while you are alive for what happens after your life. The truth is that no one likes to think about life insurance, but it is a very necessary part of life. Being responsible means making sure your affairs are in order at all times, which is basically what life insurance helps you do. When choosing a life insurance company, be sure to think about these qualities you want in a great company.

Reputation

One of the most important things you need to consider when choosing between life insurance companies is reputation. You should only work with companies that have outstanding reputations. There are far too many scams in the world to fall for, so be sure to stick with companies that look and feel legitimate. This does not mean you should always go with the largest company out there, just be sure that the insurance company you choose to work with is professional and will be around when you need them to be.

Competitive Prices

Just like auto insurance, you need to shop around for life insurance rates. Depending on your age, different companies will be able to offer you different prices. You may pay more on one policy, but get better benefits. Look at three to five quotes from life insurance companies before you make a commitment. Once you sign up with one company, you probably will never want to change because you may lose some benefits you have earned. So, making the right decision the first time is important. Remember to use your instinct and only work with those who are professional and legitimate.

Life Insurance Companies

Insurance is all about the evaluation of risk and it is something that life insurance companies know a lot about. Every time life insurance companies receive an application for a life insurance policy, the companies decide how much of a risk that applicant poses to their business. This is to say that the insurance companies make an educated estimation of how long the applicant is likely to live versus how many insurance premium payments they are likely to make before death occurs.

If they believe that the applicant will live long and will therefore make a substantial number of insurance premium payments during his/her life, then life insurance companies see the applicant as low risk to their business. However, if life insurance companies believe that an applicant could die soon, and therefore make relatively few insurance premium payments while they are alive, that candidate will be seen as a higher risk by the insurance companies.

How life insurance premiums are calculated

When calculating life insurance premiums two factors are considered by life insurance companies. The first factor involves an evaluation of the general likelihood of death occurring at a particular age, and involves the scaling of applicants against normal life expectancy. This sets the ‘average’ risk level that different age ranges attract; needless to say that the closer you are to your average life expectancy then the higher the risk level that you’ll be measured against.

The second factor is based on whether the applicant is above or below their average risk level for their age. Someone who has an unhealthy lifestyle, suffers from pre-existing health conditions and is in a stressful job is likely to be classified as ‘above average’. On the flip side, someone who goes to the gym regularly, does not smoke and eats a balanced diet is likely to be seen as ‘below average’. Naturally, those who are below average risk will see keener insurance premiums on their life insurance policy for their age than people who are classified as ‘above average’.

Cheaper life insurance?

While there is often little we can do about pre-existing health conditions, there are ways in which to tip the scales in our favour of cheaper life insurance. This we can do by altering our lifestyle and striking a better work-life balance in a stress-free environment. Changing lifestyle habits though can be more effective for some than it can for others.

For instance, a person in their 20s living out an unhealthy existence is likely to be seen as less of an insurance threat for their age to life companies than someone in their 50s with the same unhealthy lifestyle. This is because the body of a 20-year-old will respond more efficiently to improvements in lifestyle than will the body of a 50-year-old. In essence therefore, there are different degrees of being above average and below average, making the calculation of life insurance premiums for each individual definitely a job for the experts at the life companies!

Life Insurance Basics

In general, may people understand that having life insurance in any form is a necessity. The policy of life insurance is an excellent method of providing protection for your family members in the event of your death. While many people understand that is important to have life insurance they may not understand that there are many different types of policies available in the world today.

One type of life insurance policy is called “Whole Life Insurance”, this type of life insurance is effective provided you continue to make the monthly payments upon the premium. This is a very popular type of life insurance because it allows you to build a cash value on the policy and is on a basis that is tax-deferred. The way this works is that a portion of the premium you are paying is put into an account of savings that the policy invests into. All interest that is earned upon the policy is put into the savings and helps to build the cash value. Once the cash value reaches a higher level, you could be required to pay the premium after age or you could be allowed to borrow against that cash value.

Another attractive benefit of having a whole life insurance policy is that your premium will always remain the same. At no time will the amount change at all, therefore as long as you continue to pay the premium each month, you will remain at the same amount for the entire time. If you choose to take a loan out on the cash value you have earned, the only difference you will have to pay is paying back that loan. One downside to this policy is the fact that you will have no control whatsoever over how the company chooses to invest the dollars you pay on your premium.

Another type of life insurance is the term life insurance policy. This policy is selected for a specified amount of time. If you should happen to pass away during the term of this specified time, then your family would then receive payment in the form of a lump sum as the contract specifies. Typically, the premiums upon this type of policy is far cheaper than other types and it does not allow you to build any type of cash value. With this type of life insurance, your premium can change or increase on a yearly basis and it generally does increase each year. It is the more expensive type of insurance that is available however it will provided your family with complete protection in the event of your death.

Life Insurance Available With Tax Relief

At last you can buy life insurance and get tax relief. The breakthrough results from changes in the Gordon Browns’ latest Budget speech but the tax relief is only available on a new special sort of life insurance policy. You can’t get tax relief on your existing life insurance policies.

These new policies exploit a loophole in the new Finance Bill and should result in savings of between 5% and 15% for standard taxpayers and around 30% for higher taxpayers.

But there are strings attached! You can’t add extras on to your life policy such as critical illness cover and the insured sum must be a fixed sum. Neither can you have a joint policy. Basically, it has to be a bog standard, level term, single beneficiary, life insurance policy.

Then there are more restrictions, but quite honestly, these are unlikely to pose a problem to anyone unless they’re very wealthy! You can’t have one of these special life policies if the annual contributions you pay into your pension plus the life insurance premiums, exceed £215,000 per year. Furthermore, if the value of your pension fund plus the payout on your life policy exceeds £1,500,000, the current limit set by the Chancellor, then the excess will be taxed at 55%. Conventional life insurance policies are excluded from this calculation.

Tax relief on the premiums is automatically collected by the life insurance company so you pay a premium which is already reduced by standard rate tax relief. If you’re a higher rate taxpayer, you’ll have to claim the extra tax through your self-assessment tax return. However, once you’ve told your taxman about your premiums, they should automatically continue to give you the tax relief through your tax code.

So why are the savings less than the value of the tax relief? Well, the reason is that the life companies have to administer the tax relief and there are certain operational restrictions imposed by the Inland Revenue on the insurance company. This means that the basic cost of these policies is a little more than conventional life insurance – but after the tax relief you should save.

As with all these loopholes, you must be aware that the Chancellor could remove the tax relief. Having said that, it is rare for a future tax change to be applied retrospectively so you are likely to be safe. Your income could also change and move you into a lower tax bracket. This would reduce your savings.

This new type of life policy is now available from most of the big UK insurers and specialist life insurance brokers. However, you won’t be able to get an online quotation – you’ll have to speak on the phone to a Life Insurance Adviser.

And just to confuse matters these policies are known under a range of names: Pension Term Insurance, Life Insurance with Tax Relief, Life Protection with Tax Relief – but they all mean the same thing.

Oh yes, let me confirm one miss-understanding. No, you don’t have to buy a pension at the same time!

The Benefits of Obtaining a Life Insurance Plan

Everything in life is uncertain that people should prepare for any eventuality. In fact, the only things certain in life are taxes and death. One or both of these things are bound to happen at some point in a person’s life. While taxes will always be present in every society, death can come like a thief in the night.

Sickness and death are frightening as it is. They become all the more frightening when a person has not prepared for such an eventuality. This is the reason why every person should get a life insurance.

People should always plan their finances and getting a life insurance is one way of planning their finances. Getting a life insurance is just like saving up for the future because there are life insurance policies that provide for a cash value in the event that the insurance is not used up by the person insured. Under this provision, the insured can withdraw or borrow from his insurance policy. It also means preparing for the future of the people you love in case something happens to you.

A life insurance can come a long way in helping dependents who experience the death of a loved one. When the bread winner dies, these dependents have no one to turn to but if the bread winner has a life insurance, then he is assured that he will leave his dependents with something to hang on until such time when they are already capable of fending for themselves.

Any person who has an income should get a life insurance not only to serve as a lifeline for their dependents. A life insurance can also take of the death-related expenses of the deceased including expenses for the funeral and even for probate of his will.

Some people are not as lucky as others and they will not be able to leave mansions and lands to their dependents. With a life insurance policy, a parent can now leave even a meager inheritance to his dependents or beneficiaries.

Getting a life insurance policy is very important especially for people who have dependents, particularly very young children who are not yet able to work and fend for themselves. The amount of life insurance a person should get should be based on the number of dependents he has and also on his paying capacity.

A person interested in getting a life insurance policy can choose from several kinds of insurance—the term insurance and the whole life insurance are examples. A term insurance is paid out by the insurer after the death of the insured. A whole life insurance is much more complicated and involves a lot of provisions and benefits.

No matter what kind of insurance you want to get, every person should look at the possibility of getting a life insurance plan. This will assure them that their loved ones would be taken care of in the event that they are no longer there to support them.