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The Different Types of Life Insurance

There are numerous companies existing today that offer life insurance policies. Though the crux of the policy (to ensure a safe and sound life of an individual’s survivors as well as to the individual) does not alter yet companies try to differ with each other by making different classifications or bifurcations.

Broadly the life insurance is classified into two.

1. Term Life Insurance Policy- Anyone can opt for a term life insurance. This type of policy is basically meant to cover a person’s short term requirements. For instance if the policyholder unfortunately meets with a grave accident, he can claim for the insurance amount. But it also compensates the bereaved in the case of death of a family member. All in all it is a policy that helps in covering potential need for life insurance in the short run.

Term life insurance is usually a renewable and convertible program. It ranges from one to hundred years. If it is a one year program then the cost of its coverage increases after every one year till the time it expires. Generally the expiry is at the age of 75. While if the policy is term to the age of 100 along with cash value it subsequently becomes a part of the insurance for ‘whole life’. Quite often it is noticed that it is cheaper to buy a whole life insurance policy than a non-cash one in value Term 100 policy.

2. Permanent Life Insurance– this is life insurance for the entire life of the individual. The value of this policy increases throughout the time one participates in the program. Terms such as Par and Non-Par are widely used in this context. Par whole life coverage generates dividends that are a partial return of the premium paid for coverage and investment growth. The amount of dividends keeps on changing from annually. On the other hand the non-par whole life insurance policies offer no dividends. The future cash values in these cases are not projected but assured or guaranteed.

• Besides this whole life-quick pay premium policies are also available. In these there is a fixed premium that one has to pay for quit a short interval of time till the time it is entirely paid up. The death benefit in this policy is leveled and paid up at the time the premium ceases.

• Whole life insurance policy can also be fractured in terms of premium payable for 15 years, 20 years and 65 years of age. The terms and conditions in these cases remain more or less the same.

Universal life insurance policy is meant for people who require a life insurance, have a big marginal tax bracket, big RRSP and pension contributions, paying a good tax on investment income, want to have an additional future income and have an investment prospect for at least 10 years. These policies are considered to be most difficult of all the insurance contracts.

How Universal Life Insurance Works

Universal life insurance is just one of several types of life insurance policy available through life companies today. Unlike term life insurance or mortgage (reducing) life insurance, universal life insurance gives your insurance policy a cash-in value, allowing you to withdraw funds accumulated on your universal policy as and when needed.

This flexible approach to life insurance is very popular in the US and offers a real alternative to standard term & mortgage life policies where the policyholder does not normally get to benefit directly from the life insurance funds, unless they are diagnosed as being terminally ill. Universal life insurance also provides policyholders with the ability to accrue interest on their life insurance premiums – something that a standard life insurance policy does not offer.

How universal life insurance works
Universal life insurance works in a similar way to a high interest long-notice deposit account. When an insurance premium payment is sent to the life company the company deposit the funds into an interest account after deducting a nominal expenses charge per deposit. The funds then gain interest, with interest accrued being credited to the account on a monthly basis. Each premium payment made of course increases the fund, while compound interest is earned on the account month upon month. The cost of maintaining the insurance product or products purchased through the universal insurance scheme are also deducted from the universal account on a monthly basis.

Should the insurance policyholder wish to withdraw funds from their universal life policy then they can do so from the cash surrender value of the life policy. Withdrawals are normally controlled / limited to a set number per year. Depending upon the policy provider there may also be caps on the amount of money that the universal life policyholder can withdraw and a stipulation on a minimum amount of funds that should remain in the universal life account.

It should go without saying that withdrawals from a universal life insurance policy will reduce the overall amount of funds available when a lump sum claim is made upon death or terminal illness diagnosis. It is therefore important to manage the universal life account to ensure that there is sufficient coverage for your family and dependants in the event of your death. If you don’t have the time to carefully manage a universal life product then you may end up with little to show for your life insurance premiums if and when lump sums pay out are triggered.

How To Use Life Insurance Wisely

 

Every family should have a life insurance policy on at least one of the financial providers. A policy should always be in place in case one of the primary breadwinners passes away so that the family will be able to support itself if no other source of income is available after the breadwinner dies.

Estate or “Death” taxes can be as high as 55% when the insurance policyholder dies. Many families cannot afford to pay these steep taxes and still maintain the lifestyle that they are accustomed to. Therefore, we have compiled a few tips to help ensure that your family can maximize the benefits they receive from your life insurance policy – and avoid giving so much of it to the government.

First of all, you should know that a portion of your estate will be given to your beneficiaries with tax exclusion. The number of dollars covered by the exclusion each year varies, but here’s a brief overview: in 2004 and 2005, the exclusion was $1.5 million per person. From 2006 through 2008, the exclusion is $2 million, and, in 2009, the exclusion is $3.5 million. The estate tax is repealed for the year 2010, but the tax returns with an exclusion of $1 million in the year 2011. Now, that can get confusing!

Because the government can take so much of your estate for taxes, it’s important to shield as much as possible with the use of a variety of Trusts. One such Trust is the Irrevocable Life Insurance Trust, otherwise known as the ILIT.
When you establish an ILIT, you will name a trustee to manage that trust. Your trustee can be your financial advisor or a beneficiary. Your trustee will purchase a life insurance contract on your life. Upon your death, the policy’s death benefit will provide liquidity of the assets in your Trust.

With your ILIT, you can control how the estate is divided and spent. Having the ability to control your own estate, post-mortem, may prove to be especially helpful if you have young adults who are going to receive a sizeable sum of money. You can, for example, enumerate which funds will be spent for education, which for costs of living, and which for other activities. Thus, you can allocate portions of your estate for any activities you wish.
You can also transfer ownership of the life insurance policy you already own. However, there are complications that may arise from the transfer. You will want to consult a qualified attorney to ensure that you fully understand how the system works. For example, if you die within three (3) years of transferring ownership of your existing policy, the life insurance policy will be taxed as part of your estate.

With the right help, figuring out how to handle life insurance (and your estate in general) doesn’t have to be difficult or complicated. Consult a qualified attorney for more information on how to set up your ILIT or other Trusts so that your beneficiaries can receive the most benefit from your assets.

Health and Life Insurance Options

If you’ve found your way here, you’ve no doubt decided that you need to purchase a new insurance policy or add to your existing level of insurance. It can be a little confusing deciding just what you need. So let’s cover some of the most popular types of insurance.
Critical Illness Insurance
Heart disease, stroke and cancer are just a few of the critical illness that bring a chill to your spine when you are diagnosed. The good news is that with the advances with modern medicine many illness that even recently were almost always fatal can now be treated and life goes on as normal. However in a worst-case scenario, critical illness insurance helps you cope with the expense of your illness while you are treated and helps your loved ones to go on unencumbered by the financial burden left by a long illness should you lose the battle.

Disability Insurance – One of the most popular forms of supplemental insurance, Disability Insurance pays you a percentage of your income as a benefit should you become disabled. You use these benefits to help with out of pocket expenses not covered by your major medical policy and to pay your household bills while you recover from a temporary disability or a lump sum payment or a lifelong benefit in the case of a permanent disability.

When shopping for a Life Insurance quote, Term Life Insurance and Whole Life Insurance are the two most popular choices. Let’s explain each of these:

Whole Life Insurance – When shopping for a Whole Life Insurance quote you will find that, the policy remains in force during your entire lifetime as long as the premiums are paid. The type of life insurance also builds what is commonly called a cash value that you borrow under certain circumstance after a period of time.

Term Life Insurance – When shopping for a Term Life Insurance quote keep in mind that this insurance will cover you for a specified time only such as five years. Your premiums do not increase during the term of your policy but will likely increase once it is time to renew the term. Term Life Insurance does not build cash value.

Term life is generally cheaper if you are younger in age and a good starting point for a safety net for a young family until you’re ready to invest in long-term whole life insurance.
Now you’re fully informed to make the right choices as to just what new or additional insurance to choose for yourself and your family.

Different Types Of Life Insurance Policy

If you are consider purchasing life insurance, an overview of the available types should prove helpful. This article will briefly discuss the difference between whole and term life insurance, as well as some variations on whole life insurance.

The easiest way to understand the difference between whole life insurance and term life insurance is to look at what is meant by their names. When you purchase whole life insurance, you are covering your “whole” life – as long as you own the policy, it will pay a benefit when you die. What that benefit is depends on the value of the policy at the time of your death, but you own the policy even if you are no longer making payments on it. Whole life also accumulates a cash value on a tax-deferred basis. In addition, whole life can pay dividends throughout the life of the policy.

Term life insurance, on the other hand, is purchased for a certain term or period. As long as you die within that period, term life insurance will pay an agreed upon amount to your beneficiaries. It will not pay if you cease to make payments or if you die after the term has expired. In addition, term life insurance has no cash value.

Two other aspects of whole versus term life insurance should be pointed out. The first aspect is that premiums for whole life insurance are higher to begin with, but remain steady over time. On the other hand, premiums for term life insurance are lower near the beginning of the policy, but increase over time. Another aspect is that you can borrow against the cash value of a whole life insurance policy. This is not possible with term life insurance, since it does not have a cash value. There are two variations of whole life insurance that need to be mentioned. The first is a more flexible form of whole life called universal life insurance. With universal life insurance, you can adjust (within certain limits) the premiums as well as the benefit amount over time to suit your financial situation. This is made possible by placing the premiums in a fund that accumulates based on the interest rate. As with normal whole life insurance, this type of policy has a cash value that can be borrowed against.

The second variation on whole life insurance is called variable life insurance. This type is similar to universal life insurance, except that the premiums in the fund are tied to the financial markets rather than to interest rates. While the potential for growth is greater with this type of insurance, the potential for loss is greater as well.

As you can see, there are some choices to be made when considering the purchase of a life insurance policy. Now would be a good time to use some of the other resources at this site to help you decide on the life insurance policy that is right for you and your family.

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.

Why Should I Go To A Life Insurance Broker?

A life insurance broker is a dedicated person that encourages and listens to the needs and wants of a person looking for life insurance. It doesn’t matter what type of life insurance you are looking for, whole or term life. A broker will be able to find suitable rates for you to choose from. When you contact a life insurance broker, you can get the life insurance you need from a company in another city or state that you probably never even heard of.

There are many benefits to dealing with a life insurance broker when you want to purchase a life insurance policy. The broker is familiar with the requirements of many different companies and knows which ones he/she can contact to get you the best rates on life insurance. It does not cost anything extra to use a broker for your life insurance needs and you do get lower rates than if you went searching on your own.

When you contact a life insurance broker, he/she will sit down with you to determine your needs in life insurance. The broker will help you decide how much of a settlement your family would need in the event of your death and whether or not you need whole or term life insurance. Once those matters have been settled, the broker will then offer your needs to several different companies in order to get the best rates on life insurance.

The companies that the broker contacts will come back with quotes based on the specifications you set out in the application for life insurance. You can take these home with you can go through them on your own to decide which one offers the best rates on life insurance. Of course, the life insurance broker can advise you about which quote is the best, but the final decision rests with you.

Once you accept the offer, the broker will write up the policy for you based on the quote you choose. You pay the life insurance broker and your policy comes into effect. You can search online for a broker just as easily as you can search for life insurance. Instead of having to contact three or four life insurance companies for quotes in order to get the best rates, let a broker do the work for you.

It pays to consult a life insurance broker, provided they are expert and experienced.

Term Life Insurance – Ideal Policy for Families

My father died when I was nine. He left behind my mother and four children aged between seventeen years and nine and no money. Sure, I missed him but at nine, I didn’t really have much idea about death or loss. I know it sounds selfish but what I really missed was our old lifestyle. We had to move house because we lived in a company house and couldn’t stay there anymore. We had to give up our car because that was provided by the company too. All we could afford was a rundown council house. It was small and cramped and didn’t have much in the way of fences so we felt we had neighbors right on top of us. This was salt to the wound of our grief, all these niggly things that had now become our life. I don’t know why my father didn’t take out life insurance, all I know is that he didn’t and we bore the consequences of that decision for a long time.

It has made me wonder why so many people roll their eyes when the words ‘life insurance‘ are uttered out loud. Sure I can understand not wanting to contemplate a scenario that would require you or your family to actually need it but that is no excuse for ignoring it altogether and not planning ahead. Imagine, just for a moment, your family’s life if the worst was to happen and you didn’t have life insurance?

The purpose of life insurance is to guarantee an income to your spouse and children if you were no longer able to contribute to their welfare like you do now. Think about it, if something were to happen to you, could your family afford to live in your current home? Would there be enough money to maintain their current lifestyle? Would the cost of a funeral become a burden? Would your spouse be able to support your family easily? Or would the stress and grief and financial burden of loosing you cause unendurable hardship for them?

Maybe you think that because you have saved and invested wisely and setup a solid foundation that despite missing you, your family would be OK financially. The reality is that it is unlikely. This is particularly true for families with young children. This is often a time where families are still struggling to become established and often debts are high, savings low, caring for children is costly and income may not be at its peak or perhaps one partner is out of the workforce to care for the children. Of course, it is this time when funds are often stretched that life insurance is most needed but often that very fact puts families off from the regular commitment of insurance premiums.

But the good news is that it makes you a good candidate for term life insurance because it is the most inexpensive form of life insurance around. The premiums for term life insurance are worked out based on your age and health and is usually purchased in terms of a specific number of years – 1, 5, 10, 20 or whatever period you would prefer. The upshot is that term life insurance has the highest coverage for the lowest premiums.

While term insurance is not ideal for older individuals as prices go up substantially with age, it is the a great solution for younger couples or families who have high debts including mortgages, life expenses and dependants. The insurance can cover you while your children grow and the mortgage is paid off. By the time the policy expires you will more than likely have invested, paid off your major debts and no longer have dependants.

So Who needs to be Covered with a Life Insurance Policy? Given that insurance is really about income protection – providing funds when you can’t – you would normally cover whoever is contributing to the family finances. So first up, make sure the primary income earner is covered. If this income disappeared then you want to make sure the ongoing family needs are covered.

But don’t stop there. If your spouse looks after the children full-time and something were to happen to them, how would you fund childcare? Insurance could cover that additional cost. So if any secondary income is relied on to cover expenses either through income or an unpaid contribution then that person should insurance policy.

Do you need to get life insurance for your children? Generally, this is only advised if you can’t afford funeral expenses (generally about $5000). Otherwise, there is no reason for children to be insured as they do not contribute to the family income.

Having life insurance plan not only gives you peace of mind knowing your family will be taken care of after you or your spouse has gone, it may well be one of the best financial decisions your family could make.

Why Buy Level Term Life Insurance?

Term life insurance is often called temporary life insurance. Term life insurance is purchased to cover some type of asset over a fixed period. Term life has much lower rates than permanent plans because of these shorter periods. Level term insurance is purchased to cover short intermediate-term obligations. The times can be 5, 10, 15, and sometimes 20 years. Short-term debt is often covered by a level term policy. Family budgets are full of short-term debt obligations. Families buy automobiles, appliances, furniture, and many other household goods and are in debt for these items over a short period. When you purchase these items, you are often approached to buy credit life insurance to cover these obligations. It would be less expensive for a family to purchase a level term policy or rider to cover this kind of short-term debt.

Level term policies are better than credit life policies because the insured can choose the beneficiary. The credit company is often the beneficiary with credit life insurance and so the insured has no option in how to use the money at time of death. Level term policies are better buys to hedge against inflation. The decreasing term policy is a little less expensive but the coverage declines. The cost of goods and services never declines and so a level term policy will at least maintain its original face amount for the whole time.

You may want to compare level term rates and decreasing term rates. The difference may not be that much and so level term insurance may be a better purchase in the end. The best type of life insurance planning includes a base of permanent insurance for lifetime needs and additional forms of term insurance for temporary needs. Level term life insurance is an excellent option for short term or intermediate term debt obligation.

Whole Life Insurance Tips for Interested Policyholders

Before deciding which kind of life insurance policy is best for you, you must know the key aspects of whole life insurance and how it will be beneficial for you. With a whole life insurance policy, you can make your loved ones financially secure in the event of your death. Simply speaking, life insurance helps your loved ones by paying them upon your death.

What is whole life insurance?
Whole life insurance is a permanent life insurance, which covers your whole life with timely premium payments as long as you live.

With increase level of premiums and cash values, this life insurance policy will be the best choice for long-term goals. The amount of guaranteed cash values could provide money to help during emergencies or temporary needs.

Features of Whole Life Insurance
1. Premiums generally are level and payable for life: In the starting premiums will be little higher than a term life insurance but as you go elder, the less expensive will be your annual premiums.

2. Dividends: Dividends are not guaranteed with whole life insurance but there is a chance of earning dividends.

3. Guaranteed Cash Values: In case of term life insurance, there are no cash values but with whole life insurance, some money will be stored as cash values. If you give up the policy, accumulated guaranteed cash values would be yours. You can even take loan against your whole life insurance policy.

Before signing up with a whole life insurance policy, you should ask following questions to the agent appointed by Whole Life Insurance Company.

1. Which insurance is best for me, Whole Life Insurance or term life insurance?
2. How much coverage do I need?
3. How and how much discount can I get?
4. What are your Standard & Poor’s ratings?

You must consider following aspects while choosing a Whole Life Insurance Company.
1. Expenses and commissions.
2. Guaranteed cash value.
3. Dividends and interest.
4. How do they adjust the death benefit?

You can get any necessary information from online life insurance companies with the help of fast online Internet access. Fast online Internet access and web sites available make you easily compare and get Whole life insurance online quotes.