How do you know if you need life insurance? If you do, how much should you buy? How much is it worth to know your loved ones will be protected if anything happens to you? These can be very difficult and confusing questions to answer.
Life insurance is an investment and a financial commitment that lasts for a considerable period of time. While these questions may be difficult to answer, researching and buying your policy online is quite easy. You can also always grab a free, no obligation quote, which is usually available to you instantly.
To know if life insurance is right for you, you need to know what it does. The primary function of life insurance is to provide a death benefit payout in a tax efficient way. For example, if you would like to transfer wealth from your estate to your beneficiaries you can do it through life insurance.
Basically, a life insurance policy will ensure a sum is to be paid to the named beneficiary upon the death of the insured. So in which instances is life insurance generally used above its alternatives?
There are many ways the benefits from life insurance can be used. It can be used support your family or other dependents that rely on your income during their life. It may also be used to ensure the continuation or protection of a business by providing financial benefits to your partners or employees who may otherwise be at risk financially.
Life insurance benefits can replace income and support the beneficiaries in your place for a period of time. It can also be used to supplement retirement income in various instances when other contributions are not possible.
Even with all benefits listed above, there are still a few things to of which to be aware. For instance, you will be able to access the money in your policy unless it is a Modified Endowment Contract. Furthermore, it will be income tax free as long as do not exceed what you have paid into the policy and make the withdrawal by borrowing against the premiums.
You should be aware that all early withdrawals and loans against a permanent life insurance policy will reduce the policy’s value as well as the amount of any pay out. There may also be various fees and penalties associated with accessing the money early.
Another thing to be aware of is if your part of your policy is invested, the amount available for loans or withdrawals may vary depending on how the investments have performed.
Life insurance is a very good thing to have. It protects your loved ones and makes sure they have what they need after you are gone. It can provide extra income, funds to pay off final costs and debt, even money for college and retirement in some cases. Buying your policy online is a quick and easy way to get the coverage you need at the price you can afford.
Many financial planners and strategists say that life insurance is part of a sound financial plan for you and your loved ones. In general, it is an easy and mostly cost effective way to make sure your loved ones are taken care of after you are gone. The money that is paid out can help your family tremendously in what will be a very difficult time.
To most people, the ability to make a living is essential to supporting their family. What would happen to your family if your income was suddenly taken away? A good life insurance policy can give you peace of mind that the people who are depending on you and your income will not have to worry about money when you are gone.
The financial support from an insurance payout can help with bills, and even retirement income.
Pay Off Your Debts
If you have significant debt, then life insurance can make sure you do not pass that burden onto your family. The money from your policy can pay your final expenses, credit card debts, medical bills if a long illness ensued; it can pay off car and mortgage payments, maybe even pay for a college education.
As hard as it is to do, think of your life insurance policy as a guarantee that your family will not have to be burdened with a heavy load of debt after you’re gone.
For many people, giving back the community is very important. A life insurance policy is can also guarantee your favorite causes get a charitable donation in your name. Your donation can help may people and is a great way to be remembered.
How Much Life Insurance Do I Need?
Now that you have read some of the benefits to having life insurance, you may be deciding how much insurance you need. To figure out how much you need, you first need to determine what your goals are for buying coverage.
For instance, do you have a lot of outstanding debt? Do you want your loved ones to be able to pay off the mortgage? Do you want them to have a supplement to their monthly income? Do you want any money to go towards a college education? Do you want part of the payout to go to retirement savings for your spouse?
Maybe you have aging parents and would like to leave them with enough money for their retirement. Do you have any dependants? Will they be able to pay the bills without your financial contribution?
If you are single and have no dependents, you may think you do not need life insurance. Think again. You may want to go ahead and get a life insurance policy to make sure you are able to lock in a good rate. Typically, the younger you are the less insurance costs. This is especially true of you are planning to have a family at some point.
It is easier to make changes to your policy than it is to get an affordable policy when you are older. And just because you are in good health now doesn’t mean you will be in good health later. Another reason to think about getting life insurance even if you are young is so you will not be a financial burden on others when you die.
Having a policy in place will make sure your debts and final costs are covered. One less thing for you to stress about in your daily life!
A major issue with most people who have dependents is “how much term life insurance do I need?”.
Many people struggle with this question, and understandably so. There are so many things to consider that affect the amount of insurance one needs.
Here are a few questions you need to ask yourself: how much financial impact will your death cause your family? What kind of lifestyle do you want your family to have once you pass away? Do you want them to be filthy rich? Do you want them to be debt free? Does your partner work? Do you want your partner to continue to work? Do they even need insurance?
All of these factors play a key role in determining the amount of insurance you might need or want.
There are two main circumstances people use term life insurance.
The first one, being the more complicated one. You want term life insurance to provide a future income for your family. Now granted, any life insurance is better than none at all. But how do you calculate the right amount?
Well, you should start off with all of your current debts as well as the funeral costs. That will determine the amount for your first portion of your life insurance. Now to calculate the second, you have to determine how long you want your insurance to cover the income of your family and what is the desired annual income.
In this case, you’d create an investment portfolio large enough to provide the necessary annual income for the set amount of time and use some sort of withdrawal rule (usually 4% conservatively, 5% or 6% for shorter terms).
The second circumstance people use term life insurance is to cover a certain use rather than provide future income for the family.
Many times, spouse with no kids and who both make a decent income will get term life insurance that will cover all debts and funeral costs. It’s cheaper and the survivor will just keep working. This is an example where many couples over-insure themselves.
The calculation for this is fairly easy. Determine the total amount of all your debt and other expenses you might want covered and that’s the precise amount of insurance you need.
You just have to make sure to sit down every now and then and reassess your financial situation. Your debt now will probably change a few years down the road.
Bottom line, you can’t just trust the sales people or special formulas. You have to sit down, do the leg work, and determine how much term life insurance you really need. You don’t want to under-insure or over-insure yourself. You don’t want to leave your family with too little and at the same time you don’t want to put undo financial hardship on you and your family now.
Life insurance can be expensive! You don’t want to go with the first insurance salesman you meet. Be deliberate in your selection. Compare quotes, ask questions. The internet is probably the best source to get information.
Comparing quotes online is one of the easiest ways to save money on your policy. By entering your zip code, and searching the companies within your area, you’ll have the best chance of finding an affordable rate that you’ll be satisfied with for years to come.
People spend a lot of money on complicated financial products. With all the different kinds of products out today, it is difficult to keep track of what products perform what tasks and which ones are the best for you needs and lifestyle.
This is because many people are not aware of the variety of financial products that are available or they only know of them vaguely. They may not know how much they cost, any fees associated with that product or the potential benefits they offer.
How can consumers make informed decisions on what products they would be willing to buy if they do not have this basic information? The problem can often lead to consumers buying unsuitable or overpriced products that do not offer what they truly need.
It happens simply because they feel they should have some financial program in place but do not have the details to make an informed choice.
One of the common questions consumers have is regarding the difference between insurance policies and assurance policies. Put simply, insurance policies cover the costs of an event that might happen while assurance policies will pay out on the occurrence of an event that is certain to happen.
Insurance policies only last for a specific period of time. If the event occurs within that time, it pays out, otherwise it is finished. Therefore, if no claim can be made within the term of the policy, they have no remaining value.
An assurance policy is different as it always pays out. For example, a life assurance policy will generally pay out upon death or upon reaching the age of 65. This type of policy works by combining two elements; an insurance element and an investment element. The insurance part will pay out if the person dies early.
This can be used for the funeral costs or support his family. Then there is another payment made every year and this is the investment portion. The insurance company invests part of the premium on behalf of the policyholder and when they reach the age of 65, they pay this out.
Because of this life assurance policies are often used both as a method of life insurance and as a method of saving for retirement.
Do You Need Money Now?
It is possible to cash in a life assurance policy early, however there are significant fees and penalties associated with cashing out a plan early. Because of this it may unadvisable depending on the circumstances involved.
The distinction between insurance and assurance is also becoming more blurred as more companies offer both types of policies or add features of one type of policy to their other types to make them more attractive.
The distinction is still important so that you know what to ask for and know what kinds of facilities are available for insuring your life and providing for your future.
Applying for insurance online does make the process easier, as the most can research the differences on their own without the need to speak to a representative.
Life Insurance Types
Life Insurance Research