How To Shop Around For Life Insurance: Protect Your Loved Ones Just In Case The Unexpected Happens
Especially if you have dependents, life insurance is a highly important necessity. Whether you live in a mobile home or a site-built home, your young ones will obviously require some form of relief in the worst case scenario, something happens to you resulting in your unfortunate demise, incapacitation, imprisonment, or such misfortunes. Actually, affordable life insurance can provide financial relief in the case you lose your job to a layoff from work or incur huge losses in your businesses and are unable to meet your financial obligations. It’s just as important as any other financial plan. Whether you're a young person or a senior, here is a guide on how to shop around for life insurance and some things to consider in the term life vs whole life debate.
What Is Life Insurance?
Simply put, it is a contractual agreement between an insurance provider and the insured person. In the agreement, the policy provider is bound to provide payments in a lump sum to beneficiaries or heirs of the insured person at some point such as after his death. The insured in turn makes periodic payments in terms of premiums. Generally, death benefits, or the lump-sum payment are usually untaxed as they are presented to beneficiaries.
1. Know Your Options: Types of Life Insurance
The first and most important thing to think about when looking for a life cover is the options of policies available and understand what each one of them entails before making a decision which one to choose. The most common options available from most life policy providers include the following:
• Term Life Insurance • Universal Life Insurance • Whole Life Insurance
Term Life Insurance: In summary, a Term life policy usually provides the individual with life coverage for a specifically agreed period of time. This may range from 10 to 20 years depending on the insurance company. In other words, this is life insurance for a defined period of time. Upon the expiry of the agreed duration, the policy seeker may decide to renew the cover as it is or revise the terms with the policy provider. Term life insurance is considered a cost-effective option, especially if you’re looking for a temporary and flexible life insurance. In situations such as loss of income during the insurance period, the term cover policy can provide financial relief to your beneficiaries. It can also be used to cover your financial gaps, say paying off a mortgage loan or paying for your kids’ education and such other financial misfortunes.
Universal Life Insurance: This one is a permanent life policy, meaning that it provides life-long coverage. The most significant advantage about universal life policy is that the client may decide to reduce or increase their insurance contributions or premiums upon preference. It offers the freedom of flexibility and can be used to transfer wealth to heirs like in the case of a trust fund.
Whole Life Insurance: Last but not least, the whole life cover is a permanent insurance policy characterized by fixed premiums and cash value. Some people consider it as a savings plan that one can use to transfer accumulated wealth to their heirs. The downside is only that whole life insurance premium rates are higher than other options.
2. Look up Insurance Quotes Online
There are more than just a few websites online where you can find resources on life insurance quotes from a variety of policy providers in your state. Some examples of such sites include PolicyGenius.com, Insure.com, AccuQuote.com, and many others. Insurance quotes are basically resources with information about insurance providers, the policy options they have and the prices; just to mention a few of the details. With online insurance quotes, you can easily compare insurance companies and their policies based on your preferences and budget, as well as the value they provide. For instance, some companies do have sign up bonuses and discounts. The terms of the agreement, premium rates, and insurance benefits also differ from company to company, so be sure to do further research as you compare life insurance quotes. In summary, here are some of the pointers to look for
• The life insurance policy options available • Price in terms of insurance premiums • Benefits and discounts • Terms of agreement
Other sources of quotes apart from the companies themselves include insurance brokers, banks, retailers, mortgage providers and independent financial advisers.
3. Flexibility of Life Insurance and Company Reputation
Last but not least, it is important to note that in most cases, your monthly life insurance payments will depend on a number of factors, that’s if you get your policy from a good provider. Some of these may include factors such as your age, marital status, general health/medical history, occupation, hobbies, and whether you do or do not smoke. You would want to shop for life insurance with these factors in mind and look for a policy provider that favors your situation exactly. Do not forget to do some research about the reputation of your insurance provider before signing up with them.
Frequently Asked Questions
Q: Where did life insurance originate?
A: It is dated back to Ancient Rome where burial clubs helped cover the financial costs of funerals and give financial support to the survivors. However, the first company to offer this in the modern world was the Amicable Society for a Perpetual Assurance Office in London which started with 2000 members.
Q: Where does life insurance money come from?
A: People used to make annual payments per share on one to three shares In 1706 when the Amicable Society was formed. This medium is still the case in the modern world. It acts as a long-term financial planning, and it works with the payments the beneficiaries make.
Q: Which life insurance can you borrow from?
A: When you need to borrow money from your policy, you need to understand that you can only borrow contrary to permanent or whole. The whole system is more expensive than the permanent policy, and it has no expiration date. This fact, however, means that the monthly premiums are a bit higher. The whole plan provides investments where the money placed by the beneficiaries will be of more value after some years. It provides the cash value, which is like a savings account that increases the amount of death benefit. The best thing about this policy is that you do need any approval since you are borrowing money from yourself.
Q: What life insurance companies are the best in the US? In Canada? In Australia?
A: In the United States, Canada, and Australia, several companies offer quality products with excellent pricing, but there are those that care specifically for the needs, the health and the lifestyle of their beneficiaries. To come to a conclusion on which company offers the best services, one should consider;
- The proposed prices - The offered products and services - The financial capabilities of the company - The niches filled by the company
Q: When are life insurance premiums tax deductible?
A: The products presented by this policy comes in different forms and whether the premiums tax are deductible depends on two things.
- The type of system you are using - If your policy is either standalone or the one funded via superannuation
Premiums for this plan are not tax deductible unless they come in the form of a tax deduction. But, policies that receive contributions from the super fund can be tax-deductible. Beneficiaries of the policy can receive tax deductions only when;
- Their fund asks for a deduction - Their premiums originate from sacrificing their salaries or pre-tax income payments to super.
Q: Who regulates life insurance companies?
A: These companies are always licensed by their states to provide their services and products. These countries are the ones that control the companies. There are no federal governing bodies for the insurance policy, and each state has its name for the regulating bodies. But mostly, they are always found under the insurance department.
Q: Are life insurance policies taxable?
A: The revenue or the profits received by beneficiaries of this system are not included in the gross income, but the interest earned is taxable.
Q: When is Life Insurance Awareness Month?
A: Many Americans recognize September as the awareness month. The industries concerned with the policy perform campaigns that seek to educate people on the importance of the system and to help them get their coverage.
Q: Why do life insurance companies deny coverage?
A: There are many reasons, and they vary between different companies. The following are the main ones;
- Being overweight puts the companies away because it leads to many severe health risks. And if a company accepts to cover you, the premiums will be a little higher. - Coverage is denied When your income is below the level the company requires. - Poor life choices like alcoholism and drug abuse make many companies deny coverage. - Working in dangerous occupations also makes the companies reluctant in policy approval. - History of dangerous diseases like cancer can also scare away the companies. - Participating in dangerous co-curricular activities that can lead to premature death can also make you find it difficult to get an insurance policy.
Q: When does life insurance expire?
A: Most of these policies expire according to the period the beneficially sets; it could be 10, 20 or 30 years. If it expires, you can always seek to extend or renew the policy. Technically, most policies do not expire until the beneficiary reaches 95 years.
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