Life insurance can be a very complex topic. There are numerous types of policies on the market today, and each has its own set of features, benefits, and other characteristics. Some life insurance policies provide only a set amount of death benefit, while others can be highly tax advantaged long term savings vehicles.
There are dozens of different kinds of plans that you’ll need to choose form. Not only that, but there are thousands of different companies on the market, and each one is going to offer different rates depending on your application.
Understanding how life insurance works – as well as why life insurance is needed as an overall part of financial planning – can make this topic much easier. In addition, knowing how the benefits of life insurance can help a policy holder’s loved ones to avoid financial hardship can help to truly pinpoint where this important financial product fits into one’s financial life, and their overall lifestyle objectives as well.
Life insurance is one of the best investments that you’ll ever make for your loved ones. It’s vital that they have the protection that they need. We know that deciding which plan is best for you can be difficult, but that’s why we are here to help. This article is going to explore the different types of coverage and the benefits of each one.
Analyzing The Many Potential Life Insurance Needs
Everybody’s needs are different. This is one reason why there are so many types of life insurance products that are available today. What does not work for one person’s situation may be the perfect solution for another.
While many people understand that they need life insurance, it may not be clear just exactly how much coverage is appropriate. When determining the right amount of coverage, there are many criteria that should be factored in. These should include the cost of a funeral – including burial and headstone expenses – as well as any unmet medical costs, estate taxes, and possible costs of probate.
When you’re calculating your life insurance needs, there are several different factors that you’ll need to consider. Not having a large enough plan is one of the worst mistakes that you can make for your loved ones. It’s important that you have the coverage that your loved ones will need if something tragic were to happen to you. The vast majority of people that have an insurance policy are drastically under-insured, which means that their family is going to be responsible for leftover bills.
The first number that you should crunch when you’re looking to get life insurance coverage is all of your outstanding bills and final expenses that your family would be responsible for if you were to pass away. The primary goal of your plan is to give them the money to pay off the mountain of debt that you will leave. Add up your mortgage, student loans, car payments, and other expenses. As we mentioned earlier, be sure to add up the costs of your funeral and any other related expenses.
The next number that you should look at is your annual income. The second goal of your plan is to provide your family with the money that they need to replace your paycheck. If you’re the sole income-earner in your family, then your family will struggle to pay for any basic purchases. Your life insurance plan will give them the money they need to replace that source of salary without sacrificing their standard of living.
It’s Not Personal – It’s Business
Many people think that life insurance is only used for the needs of individuals in protecting their families and other loved ones. However, life insurance is not just for individual needs. It can also solve many types of business liquidity needs as well.
Life insurance can play a major role in the financial stability of a business. For example, it can protect a company against the unexpected loss of an owner or key person. It can also help to keep a business running until a replacement is found or the business can be sold.
Because businesses can be structured in a variety of ways, there are different life insurance solutions that can be put into place in order to protect them. In addition, life insurance can also be used as a form of executive deferred compensation.
Businesses can avoid many possible negative financial consequences from the loss of key people by using life insurance. Therefore, this important product should be a primary component of every business’s planning process.
Key man life insurance coverage will give your business the protection that they need if something were to happen to you. If you’re one of the main components in your business or organization, it’s vital that you give them the insurance coverage that they need.
The Working Parts Of Life Insurance
There are several components that are involved in life insurance. Some of these pieces will be dependent upon the type of life insurance policy that is being determined. The main types of life insurance include:
- Term – Term life insurance is oftentimes referred to as being “pure” insurance. This is because, in return for a premium payment, term life insurance pays out a death benefit to a named beneficiary if the insured individual should pass away while the policy is in force. This type of coverage does not include any type of cash value or investment build-up within the policy. Therefore, term life insurance simply insures against the loss of a policy holder’s life if the individual dies within the stated “term,” or time period, that the policy is active.
- Whole Life – Unlike term life insurance, whole life policies can cover an insured for the “whole” of his or her life. This means that there is no set time period in which the policy will expire, and – provided that premiums are paid – the plan will remain in-force. In addition, whole life insurance also includes a cash value component. Here, a portion of the premium payment will go into a savings portion, where the funds can grow on a tax deferred basis. Should the policy holder need cash, he or she can access some or all of the policy’s cash value through a policy loan.
- Universal Life – Universal life insurance also provides a savings component, along with a death benefit. Yet, while the cash value growth in a whole life insurance policy is guaranteed, the interest rate on the savings portion of a universal life insurance policy can fluctuate. In addition, policy holders who own universal life insurance also have more flexibility with regard to their premium payment.
Prior to purchasing a life insurance policy, it is important to have a good understanding of the goals and needs that the policy should cover. This will help to pin down which type of policy – as well as how much coverage – will best fit the specific situation.
Each kind of plan has different advantages that you’ll need to consider based on your needs and preferences. Regardless of which kind of plan that you get, it’s vital that your family has the protection that they need. Our agents can help walk you through the decision process and help you decide which plan works best for you.
No Exam Life Insurance
Another popular option for life insurance is to purchase a no exam plan. As you can probably guess from the name, no exam life insurance policies allow you to get life insurance protection without having to take a medical exam. While a no exam policy sounds attractive at first glance, there are several factors that you should be aware of when you’re shopping for protection.
The first thing that you should know is that no exam plans are going to be more expensive than a traditional plan. The purpose of the medical is to give the insurance company an idea of how much risk that you are to accept for coverage. Without that medical exam, the company is taking a much greater risk, and they are going to offset that by charging you drastically higher premiums. If you want the most affordable plan, then you need to apply for a policy that requires a medical exam.
Another pitfall of these plans that you should take note of is how much coverage that you can buy. Most insurance companies are going to drastically restrict how much you can purchase without taking the medical exam. The majority of companies will only allow you to purchase $250,000 without the medical exam. There are a few companies that offer as much as $500,000 worth of protection, but those plans are rare and much more expensive.
Working With An Independent Insurance Broker
When you’re shopping for life insurance coverage, it’s vital that you make the best decision and that you get the lowest rates available for your plan. The best way to do that is to work your local independent insurance broker in Denver or someone in your area. Unlike a traditional agent, independent agents work with dozens of highly rated companies across the nation, which means that they can bring all of the best rates directly to you, without the hassle of calling all of the companies yourself.
Our independent insurance agents have years of experience helping all kinds of clients get the best rates for them. We know which companies are going to give you the perfect plan based on your application and life insurance needs. It’s our mission to connect you with quality insurance at an affordable price.
We know that picking the best plan to meet your needs can be a tall talk, but we are here to help. If you have any questions about life insurance or getting an affordable plan, contact one of our agents today. We would be happy to answer those questions. You never know what’s going to happen tomorrow, which means that you shouldn’t wait any longer to get that protection that your family deserves.