Life insurance gives you the peace of mind knowing that your loved ones will have what they need (college, mortgage, debt payment) even if you are no longer here to do so.
At first, glance, purchasing insurance seems very complicated and tedious, however, it is simpler than it seems, we will listen to your needs and help you understand the basic operation of it so that you can choose the best option for you.
HOW DOES LIFE INSURANCE WORK?
Essentially, life insurance can be divided into four basic elements:
- Policyholder: Generally the insured, this person is responsible for the payments of the policy.
- Beneficiary: the person, group of people, or entity that receives the benefits of the policy.
- Premiums: the monthly or annual payments necessary to keep the life insurance policy active.
- Death Benefit – The money beneficiaries receive if the policyholder dies while the policy is active.
There are life insurance policies that come with additional components, however, the elements described above are the basic concepts of insurance.
The insurance company is responsible for making the payment of the policy, unless you stop making the payments, lie in your request or do not comply with its terms, the conditions of the contract will be fulfilled as promised.
WHAT KIND OF LIFE INSURANCE DO YOU NEED?
In general life insurance is divided into two types:
You should evaluate what type of life insurance policy you should purchase by analyzing your financial needs, budget, and policy objectives.
TERM LIFE INSURANCE
It offers coverage for a specified time 10, 20, 30, 35, and up to 40 years. If you should die during that time and your policy payments are made in a timely manner, the designated beneficiaries will receive the insured sum of money.
This type of ” term ” life insurance is a simple, flexible, and very affordable option, making it one of the most purchased by families.
PERMANENT LIFE INSURANCE
If your needs are longer-term, there are so-called permanent life insurance policies, these remain in force throughout your life as long as the premiums are covered, they also have a savings component which generates interest that is generally much greater than inflation and to which you can have access.
There are several types of permanent life insurance, including:
- Whole life insurance
- Universal life insurance
- Variable life insurance, and
- Indexed universal life insurance
All of these types of policies offer different levels of flexibility and a wide variety of investment options, so keep in mind that the lifetime warranty and investment component make permanent life insurance coverage significantly more expensive. compared to term life insurance.
HOW MUCH IS LIFE INSURANCE?
The amount you pay for life insurance is based on the amount and duration of coverage you choose, the type of policy, and your risk.
The life insurance company will determine the cost of the premium observing some risk factors such as:
- Health condition
- Family health history
- Tobacco use
Since one of the most important factors determining the cost of the premium is age, young and healthy applicants get the best life insurance rates, so the faster you make the decision, the greater your opportunities and benefits.
WHO NEEDS LIFE INSURANCE?
Anyone can benefit from life insurance, singles, parents, retirees, and more.
A life insurance policy provides everything from funeral expenses to taxes necessary to settle an estate of $ 50 million.
Here are some considerations to help you decide if you need life insurance:
- Income replacement: Does anyone depend on your paycheck for food, utilities, childcare, etc.?
- Paying off debt: do you share a mortgage, joint credit cards, or signed loans?
- Education: Do you want to make sure that your children can go to college even if you die?
- Legacy: Would you like to leave your descendants with an inheritance or donate to a charity?
- Wealth Tax: Did you know that families of high-income workers could face an estate or inheritance tax payment?
- Business: Would your business survive if you or a key employee died?
- Invest: Have you maximized all your earnings in your retirement accounts and still want to invest more?
- Final expenses: Do you plan that when your funeral happens there will be enough money to pay for the funeral?
If you do not have debts, neither does anyone who depends on you, you have enough money saved to pay the final expenses and if your investments give you enough peace of mind that your loved ones do not have financial problems, then you probably do not have the need to buy life insurance. If not, then purchasing life insurance is a must.
HOW MUCH LIFE INSURANCE DO YOU NEED?
The amount of the sum insured on your policy will depend on your needs and the answers to the above questions can be a guide to what you really need.
It is possible that you feel the interest of contracting a huge sum insured in your life insurance policy, however, this will depend on the monthly amount you can pay and the conditions of the policy that you hire, so we can help you find The most outstanding combination between the sum insured and monthly payment for you to make an informed decision.
The insurance company will evaluate the application of each person to check that the coverage being requested is in accordance with the real needs of the applicant.
Most financial agents and advisers suggest that you buy a policy equivalent to 7 to 10 times your income, you should also take into account additional expenses such as debts, funeral expenses, mortgages, and college tuition and lastly, subtract your liquid assets to get the right amount of coverage to buy.
HOW DO YOU BUY LIFE INSURANCE?
The process of each company is different, these are some basic steps that we suggest you follow to acquire the life insurance policy that you need:
Research: Read reviews, get quotes, and compare multiple options for choosing the right company.
Application: Your application can be completed online, on paper, by phone, or at an agent’s office, and will include questions about your health and lifestyle.
Take a medical exam: Some companies allow you to skip the exam at a small additional cost, while others require you to have a blood test.
Sign and make a payment: Once your application is approved, you will need to sign your policy and make the first payment in order for your life insurance policy to be activated.
If you take the option of purchasing a traditional life insurance policy with a medical exam, the above process, known as underwriting, will take an average of 4-6 weeks.
However, some companies offer instant coverage when you skip the medical exam and request it online.
WHAT ARE THE ADVANTAGES OF LIFE INSURANCE?
In addition to protecting your loved ones, acquiring a life insurance policy provides additional benefits such as:
MONEY WITHOUT TAXES
One of the biggest advantages of life insurance is its tax structure when they die, their beneficiaries receive the sum insured is completely tax-free, so the amount of money delivered is comprehensive.
Under certain circumstances there are occasions when paying taxes is justified, however, beneficiaries do not have to report the income received from the life insurance policy to add it to the payment of any lien.
With all types of policies, terms, add-ons, and investment options, you can tailor a life insurance policy that exactly meets your every need, tailoring your coverage as life changes.
You can get coverage from as little as a year to a lifetime and insure anywhere from a few thousand dollars of coverage to millions.
Whether your goal is to see your children in college, cover your mortgage, or permanently care for a dependent with special needs, you can shape a life insurance policy for those goals.
Many financial advisers DO NOT consider the use of life insurance as an investment vehicle.
You are likely to find that traditional investment strategies are a more viable and affordable option, so you will need to assess whether acquiring permanent insurance policy is the best option for those purposes.
However, if you have maximized all of your other accounts and need permanent coverage, a whole or universal life insurance policy could be a good investment.
Most people overestimate the cost of coverage, but in reality, life insurance (especially term) is quite affordable.
In fact, our data shows that the average cost of a term policy of $ 250,000 for a 30-year-old man who does not use any tobacco products is about $ 160 a year.
That’s almost what people pay for one or two of their streaming services, and it’s worth the crucial protection it provides.