Taking All the Questions Out of Life Insurance Types and Requirements

Are you ever too old to get life insurance? Not necessarily, but contrary to insurance salespeople, not everyone is a candidate for life insurance. There is also a lot of confusion around the difference between types of insurance such as term life and whole life insurance. Our goal is to take the confusion out of all your life insurance needs.

Many people do not understand whether or not they actually require life insurance. Most people try and avoid thinking about it and justify it by claiming they won’t need any money when they are dead. That is indeed true, but the bigger question is, “Will your spouse and or dependants need money?” If they answer is yes, you may be shopping for life insurance. The next question is what kind?

You can choose from term life insurance, whole life insurance, universal or variable universal life insurance, no-load life insurance and let’s not forget mortgage life insurance. This is a great way to have your mortgage paid off immediately if you die. This will mean your family can live mortgage free for as long as they own the house. With all the different types of life insurance policies, it no wonder most people choose not to do anything. Our goal is to take the mystery out of these policies so that you can make an informed decision.

The Different Types of Life Insurance

o Term Life Insurance: Term insurance is the backbone of most life insurance policies. You pay a fixed premium over a specified period of time. If you happen to die during that timeframe, the insurance company pays you the pre-determined amount. The issue with term life insurance is that if you don’t die within that period, the coverage ceases to exist and you are left with nothing. Another issue with term life insurance is that your premium can go up after a period of time. You can often buy another insurance policy after the term expires, the rate however will often be much higher.

o Whole Life Insurance: Unlike term insurance, whole life insurance covers you for your entire life. Basically, you pay a premium each month for the rest of your life. If you choose, you may cash in the policy while you are still alive and receive a lump sum amount. Whole life insurance policies have a face value and a cash value. The face value is the amount that is paid at death or policy maturity, the cash value is the amount you receive is you surrender the policy before you die or it matures.

o Universal Life Insurance: This type of insurance again is very different than the two above. This type of insurance policy takes your premiums and invests them into bonds, mortgages and money market funds. Your investment fund pays for the cost of the death benefit that is set when you purchase this life insurance. If your investment fund does poorly, the insurance company is on the hook to pay out a minimum guaranteed amount. This type of life insurance policy is a bit more flexible than the others because you can change the premiums and death benefits to fit your current budget. This type of flexibility is often popular with younger couples or families where circumstances can change quickly.

o Variable Universal Life Insurance: This type of insurance policy will depend heavily on how well your investment opportunities have done over the years. The better the investments do, the greater the death benefit payoff for you.

o No-Load Life Insurance: Low-load or no-load life insurance often times has fewer expenses than a traditional life insurance policy. What this means for you is that more of your premium goes towards earning you more money rather than commissions and other expenses. Speak to your financial advisor as they will likely sells no-load or low-load life insurance policies for a flat fee versus a commission.

Once you have decided that you are going to buy life insurance, the next question you need to ask is,”How much?” We highly recommend that you speak with your financial advisor and accountant. They will be able to help you determine exactly the amount of cash your family will require to maintain their current standard of living if anything should ever happen to you. They will be able to help determine what kind of life insurance rate you can afford based on your current income and expenses.

We hope we have achieved our goal about informing you on the various types of insurance on the market. There are a number of excellent insurance brokers who can offer you a range of products. We hope you have given you some information so that you can ask the right questions for you and your family.

Ignoring A Life Insurance Cover Could Be Fatal – Check Why

Many of us feel that investing in a life insurance cover is a big burden. This info is especially for them. Statistics suggest that one in four breadwinners in the UK does not have a life insurance. This is an alarming ratio as the families would be left to live a financially unstable life in the event of the breadwinner’s death. That means almost one fourth of British families live under the risk of facing an economic crisis. As a solution, the support from NHS or other government schemes could be taken. However, all government support may not be enough for the education of kids, rentals, medication for critical illness or other basic facilities.

Find here some of the myths associated with buying a life insurance policy:

Life insurance is for the man!

A survey suggests that 45% of British men and 38% women are insured for a life cover. Again, both the percentages are quite low. Moreover, its general psyche that women who do not earn do not feel the pressing need of an insurance. It was observed by Cancer Research that more than 130 women die every day due to breast cancer. With such an increasing number of women health issues, women should not keep themselves without a life insurance cover. Again 1 in 3 people is likely to suffer from critical illness. This way, life insurance cover is vital for both men and women. Ignoring a life insurance cover could prove fatal as your family would be left with many financial burdens.

Contents insurance is enough!

Contents insurance is enough! This is another misconception. While we get our car, house, laptops and other accessories insured, we tend take for granted the most important part of the family i.e. its members. Losing a family member especially if one was a breadwinner may result in a sudden financial crux. Your loved ones may need to manage for money required for the daily needs. Thus, even if you have contents insurance it is always important and urgent to buy yourself a life insurance cover. You never know the future but can certainly prepare yourself for the worse.

Mortgage cover would do!

Mortgage is a common thing in the UK. People who have a mortgage should also go for a life cover so that in case of their accidental death, the insurer would pay the remaining mortgage amount. The facts do not point to any such awareness in the Brits. According to statistics, nearly 50% of people have a mortgage with no associated life cover. All these facts and figures bring out the importance of life insurance. Be it an existing mortgage, a critical illness or death, a life cover helps the beneficiaries to manage the economic situation easily and comfortably. The lump sum amount received from insurer helps in paying for the funeral cost, mortgage, debts or other family expenses.

Reasons for a life insurance cover:

  • To support you in case of a critical illness
  • To support the family in the event of the breadwinner’s death
  • To manage funeral and other expenses
  • For financial support to the family in the future
  • For paying educational expenses of the kids
  • For mortgage payments

Who needs life insurance cover?

  • Anybody who has dependents
  • Married people
  • Newly married couples
  • Parents with a new born child
  • Every family that plans for the future
  • A retiree with a dependent partner
  • If you have a mortgage

Types of life insurance covers:

There are different types of life insurance policies in the UK. Depending on the age, health and occupation, the life covers are categorised into the following types:

Term insurance: This cover gives your life assurance for a pre-decided and specified interval of time. If the policyholder dies within this time frame then the beneficiaries would get a lump sum amount. Otherwise, the policy will lapse.

Group life cover: It is provided as part of a complete employee benefit package. This cover is for people who die while they are working with the employer. It is not required that the death should have happened during the work hours or in the office premises.

Critical illness cover: This life insurance cover is bought if one has a particular medical condition. If you die due to any other disease or ailment then the policy would lapse.

Over-50 plans: Specially designed for people who have crossed the 50 year mark, this cover pays money that can be used for various financial needs of the beneficiaries. As the policy is taken after 50, one can expect higher premiums.

Whole of life plan: Offers you cover for entire life. It is the best cover to meet your debts or can be left to a loved one when you die.

Reasons why people do not buy life insurance cover:

Lack of awareness: If you think that a certain illness or cancer cannot happen to you then you are living in an illusion. With an increasing risk of sickness and critical ailments, one cannot afford to think that ‘this won’t happen to me’. This is lack of awareness and such a biased optimism may turn out to be fatal. A life cover works well for everyone and is much needed by healthy individuals with dependents.

Too expensive: The premiums would feel nothing when compared with the cost of your life and the amount of damage your death can cause to your family. A small monthly investment as premium would give lump sum amount in case of the policyholder’s death. The return on investment is much higher as far as life cover is concerned. So, there is no point thinking that it is costly.

Government support is enough: Many of us think that NHS and other government schemes would be enough to facilitate the dependents. Well, please check with the friends and family of people who have lost a loved one and who are living on the Government’s support. You will quickly realise that this help is not enough for all the financial expenses of the family. If your partner is suffering from critical illness then the NHS service may not be enough and so, a personal insurance is a must.

Better save than insure: Few of us have a mind-set of savings. In their opinion a decent amount of saving can replace a life insurance cover. Savings may not be the best idea as it takes a longer time to accumulate a big chunk of money. For life insurance covers, we may need to pay monthly or yearly premiums but the total amount received in return is much higher than the premiums paid. This way, insurance gives much more return of investment than savings.

Considering the pros and cons, a life insurance cover seems much more reliable than any other way of ensuring the wellbeing of the dependents and loved ones. If you have not insured yourself yet then it is high time to get yourself insured so that your demise may not prove fatal for the family. Therefore, do not ignore buying a life insurance cover as it would be the best help to the family in the event of your permanent absence. Isn’t it?

Life Insurance Basics: Getting Started

Let’s be honest. The topic of life insurance isn’t exciting or glamorous, but it is important. In fact, many experts consider life insurance to be the cornerstone of good financial planning.

But how do you know if you need life insurance? How much is enough? What kind of life insurance policy is best for you?

Answering these basic questions about life insurance will help to simplify the shopping process and ultimately allow you to select the best policy to secure your family’s future for years to come.

Establishing Your Needs

To clear up any misconceptions, life insurance is designed to protect your loved ones from financial loss in the event of your death. Knowing this, it’s important to establish whether you need life insurance and how much you should purchase.

According to MetLife you generally need life insurance if:

  • You have a spouse
  • You have dependent children
  • Relatives or elderly parents depend on your income
  • Your retirement funds are not enough to provide for your spouse’s future
  • You own a business
  • You have a large estate

The beneficiaries of your life insurance policy can use the proceeds from your life insurance to:

  • Pay for last expenses and funeral costs
  • Cover estate taxes (if applicable)
  • Pay off existing debts (mortgage, car loan, credit card debt)
  • Pay for everyday expenses (food, clothing, childcare)
  • Put towards your spouse’s retirement fund
  • Donate to charity

If you don’t have dependents, you may still wish to purchase a life insurance policy to avoid becoming a financial burden to your loved ones in the untimely event of your death. Young singles also benefit from purchasing life insurance while they’re young and healthy, allowing them to secure a low premium for years to come.

Choosing a Dollar Amount

Figuring out how much life insurance your loved ones would need to maintain their quality of living can be tough. Generally speaking, experts recommend purchasing between 5 and 10 times your annual salary. But, as MetLife points out, your exact need for life insurance will depend on your personal and financial circumstances.

You can get a ballpark estimate of your life insurance needs by first totaling the funds your family would need for the abovementioned items (funeral costs, daily living, etc.). You can find helpful worksheets online that will help you organize and come up with this list of expenses.

After you’ve totaled your expenses, take stock of the funds you have in cash, savings, retirement accounts, bonds, property, pension and Social Security. Subtracting your financial resources from your expenses will give you a rough idea of how much life insurance you should purchase.

When it comes to choosing how much life insurance to purchase, it’s a good idea to get an idea of your needs before buying a policy–but your licensed life insurance professional will undoubtedly help you choose a dollar amount that accurately reflects the needs of your beneficiaries.

Selecting a Policy

Generally speaking, there are two types of life insurance: term life insurance and permanent life insurance. The type of policy you select will depend largely on your life insurance needs and what resources you have to pay life insurance premiums.

Term Life Insurance

Term life insurance, as the name suggests, will cover you for a specified amount of time, which means the insurer will only pay out a death benefit if you die during the term of your policy.

According to the Insurance Information Institute (I.I.I.), most people purchase a 20-year term policy, although smaller terms are available. Of course, you can renew your term life policy after it expires, although your premiums may increase as you age. But all in all, because of the “temporary” nature of term life insurance, policies are generally much cheaper and are therefore an attractive option for young people and families with a limited income.

Permanent Life Insurance

On the other hand, permanent life insurance, as you might have guessed, is permanent. A permanent life policy will pay out a death benefit whether you die tomorrow or in 60 years.

Permanent life insurance is also an appealing option for many because of the added benefit of the policy growing on a tax-deferred basis, which can grow to be fairly large over time. As a policyholder, you may be able to borrow against this cash value while alive, which has been of great help to some. Of course, most loans need to be paid back otherwise they will be subtracted from the death benefit, and your beneficiaries may have to liquidate assets to pay back the loan.

Nonetheless, permanent life insurance offers a wide variety of saving and investment options. Because of this, policies are generally more expensive than term policies, which may be hard for young adults to handle.

Your life insurance professional will help you decide which type of policy is best for your life insurance needs–and your budget. But researching these policy types beforehand can help you narrow down which policies appeal to you.

Knowledge is Power

No, learning about life insurance and planning for the unexpected isn’t glamorous, but it is important. So take advantage of consumer resources and talk to a life insurance professional about purchasing affordable life insurance. You’ll rest easier at night knowing your loved ones are taken care of for years to come!