1. Before you start
Conventional wisdom indicates that life insurance is sold, not bought. In other words, some people are reluctant to discuss the importance of owning life insurance, and others are simply not aware of the need for life insurance. Although many large companies provide life insurance as part of their benefits package, such coverage may be insufficient.
Who needs life insurance? If there are people who depend on you for financial support, or if you work at home with your family offering services such as child care, cooking and cleaning, you need life insurance . Also older couples may need life insurance to protect the surviving spouse against the possibility of retirement savings of torque being exhausted by unexpected medical expenses. And individuals with assets may need life insurance to help reduce the effects of inheritance tax or transfer of wealth for future generations.
2 Types of Insurance
Life insurance is the most fundamental, and generally less expensive form of life insurance for people aged under 50. Ultimately, the policy is written for a specific period, usually from 1 to 10 years and may be renewed at the end of each quarter. Also, the increase in premiums at the end of each term, and may become prohibitive for older people. Eventually, at the political level locks of the annual premium for periods of up to 30 years.
The decline in the balance duration of insurance, a variation on this theme, is often used as a mortgage insurance, because it can be written to reflect the amortization of the mortgage principal. While the premium remains constant over time, the nominal value declines. Once the mortgage is paid off, the insurance is no longer needed and the policy expires. Unlike many other policies, the duration of insurance has no cash value. In this sense, it is "pure", without any assurance of investment options. Benefits are paid only if you die during the policy term. After his term, your coverage ends, unless you choose to renew the policy. When buying insurance, you can look for a policy that is renewable until the age of 70 and convertible into permanent insurance without a medical examination.
Whole Life permanent protection combined with a savings component. As long as you continue to pay the premiums, you are able to block coverage at a level premium rates. Part of this comes as a bonus cash value. As policy gains in value, you may be able to borrow up to 90% of your policy's cash value taxation.
Universal Life is similar to whole life with the added advantage of being a rise in profit on the savings component. Universal life policies are also very flexible with regard to premium and face value. The premiums may be increased, decreased or deferred, and redemption value may be withdrawn. You may also have the option to change the face value. Fonts universal life insurance typically offer a guaranteed return on the cash value, in most cases at least 4%. You will receive an annual statement, which sets the value for money, full protection, and pay school fees.
Disadvantages of this type of insurance are higher taxes interest rate and sensitivity. Universal policies include the costs in advance, as well as administrative costs totaling more than 5% to 7% of your premium. You can also find your premium increases when interest rates decline.
Variable Life offers generally fixed premiums and control over your policy's cash value. Your cash value is invested in your choice of shares, bonds, money market or financing options. Cash values and death benefits can go up and down based on the performance of your investment choices. Although the death benefits are usually one floor, there is no guarantee on cash values. Fees for these policies may be higher than the universal life and investment options can be volatile. On the positive side, capital gains and other investment earnings accumulate tax deferred until the funds are invested in the insurance contract.
The Universal Life insurance variable is the most aggressive type of policy. As variable life, you control your investments in mutual funds. However, there are no guarantees on variable universal policies beyond the nominal value in the event of death. These policies are probably better suited for wealthy buyers who can afford the risks involved.
Key Terms and definitions
* Face Value - The death benefit initial amount.
* Convertibility - option to convert from one type of policy (term) to another (whole life), most often without a physical examination.
* Value - The savings portion of a policy that can be borrowed against or cashed in.
* Premiums - monthly, quarterly or annual payments necessary to maintain coverage.
* Recipient - The individual (s) or entity (eg, trust), which is designated as beneficiary.
* Paid Up - A policy requiring no further payment of bonuses due to prepayment or earnings.
3 How much insurance do I need?
A popular approach to the purchase of insurance is based on income replacement. In this approach, a formula of five to ten times your annual salary is often used to calculate the amount of coverage you need. Another approach is to purchase insurance according to your needs and preferences. The first step is to determine your income needs replacement.
Currently, a large portion of your income goes to taxes (insurance benefits are usually tax-free) and the support of your own lifestyle. Begin by identifying your net income after taxes. Then, add up all your personal expenses such as food, clothing, subscriptions to magazines, clubs, transportation costs, etc. The rest is the annual income you will need to buy to replace him. You want a death benefit amount which, when invested, will provide annual revenues to cover that amount. Then you need to add to that the amounts needed to fund the one-time expenses such as tuition fees for college for your children or mortgage or debt repayment.
Replacement of income for spouses non-active is an important and often overlooked insurance need. The coverage should include costs of day care, household, or nursing. Add to that all the net income of part-time employment.
Finally, your own estimation "final expenses" such as taxes, uninsured medical expenses, and funeral expenses.
4 Other types of life insurance
The survival rate for the life insurance (also known as the last to die or second to die) is a type of single contract that ensures the lives of two people. It pays a death benefit at the death of the second insured. Therefore, it is often less expensive than two individual policies. The survival rate to life is often used for estate planning, it may be possible to leverage potentially today's dollars - through insurance premiums - a death benefit potentially significant that can be used for inheritance tax, to create wealth for future generations, or to benefit a charity. These policies may be available if an insured is "medically uninsurable."
First to die life insurance provides the lives of at least two individuals and pays a benefit upon the death of the first insured. This policy is useful to cover a mortgage or other major debt instrument where there is more than one debtor. In addition, it can be an ideal tool for financing a buy-sell agreement in a business held closely.
5 Conclusion
Life insurance is an important element of good planning. The purchase of insurance involves asking a variety of personal lifestyle and financial issues. If you are not already working with an insurance expert, you might consider the advice of a fee-for-service financial planner who can offer an objective analysis of your insurance options. When you decide what you want, there are many insurance companies solid choice. Check your library or an independent insurance expert for companies with the highest rate among the four rating agencies: AM Best, Duff Phelps, Standard & Poor's and Moody's.
Conventional wisdom indicates that life insurance is sold, not bought. In other words, some people are reluctant to discuss the importance of owning life insurance, and others are simply not aware of the need for life insurance. Although many large companies provide life insurance as part of their benefits package, such coverage may be insufficient.
Who needs life insurance? If there are people who depend on you for financial support, or if you work at home with your family offering services such as child care, cooking and cleaning, you need life insurance . Also older couples may need life insurance to protect the surviving spouse against the possibility of retirement savings of torque being exhausted by unexpected medical expenses. And individuals with assets may need life insurance to help reduce the effects of inheritance tax or transfer of wealth for future generations.
2 Types of Insurance
Life insurance is the most fundamental, and generally less expensive form of life insurance for people aged under 50. Ultimately, the policy is written for a specific period, usually from 1 to 10 years and may be renewed at the end of each quarter. Also, the increase in premiums at the end of each term, and may become prohibitive for older people. Eventually, at the political level locks of the annual premium for periods of up to 30 years.
The decline in the balance duration of insurance, a variation on this theme, is often used as a mortgage insurance, because it can be written to reflect the amortization of the mortgage principal. While the premium remains constant over time, the nominal value declines. Once the mortgage is paid off, the insurance is no longer needed and the policy expires. Unlike many other policies, the duration of insurance has no cash value. In this sense, it is "pure", without any assurance of investment options. Benefits are paid only if you die during the policy term. After his term, your coverage ends, unless you choose to renew the policy. When buying insurance, you can look for a policy that is renewable until the age of 70 and convertible into permanent insurance without a medical examination.
Whole Life permanent protection combined with a savings component. As long as you continue to pay the premiums, you are able to block coverage at a level premium rates. Part of this comes as a bonus cash value. As policy gains in value, you may be able to borrow up to 90% of your policy's cash value taxation.
Universal Life is similar to whole life with the added advantage of being a rise in profit on the savings component. Universal life policies are also very flexible with regard to premium and face value. The premiums may be increased, decreased or deferred, and redemption value may be withdrawn. You may also have the option to change the face value. Fonts universal life insurance typically offer a guaranteed return on the cash value, in most cases at least 4%. You will receive an annual statement, which sets the value for money, full protection, and pay school fees.
Disadvantages of this type of insurance are higher taxes interest rate and sensitivity. Universal policies include the costs in advance, as well as administrative costs totaling more than 5% to 7% of your premium. You can also find your premium increases when interest rates decline.
Variable Life offers generally fixed premiums and control over your policy's cash value. Your cash value is invested in your choice of shares, bonds, money market or financing options. Cash values and death benefits can go up and down based on the performance of your investment choices. Although the death benefits are usually one floor, there is no guarantee on cash values. Fees for these policies may be higher than the universal life and investment options can be volatile. On the positive side, capital gains and other investment earnings accumulate tax deferred until the funds are invested in the insurance contract.
The Universal Life insurance variable is the most aggressive type of policy. As variable life, you control your investments in mutual funds. However, there are no guarantees on variable universal policies beyond the nominal value in the event of death. These policies are probably better suited for wealthy buyers who can afford the risks involved.
Key Terms and definitions
* Face Value - The death benefit initial amount.
* Convertibility - option to convert from one type of policy (term) to another (whole life), most often without a physical examination.
* Value - The savings portion of a policy that can be borrowed against or cashed in.
* Premiums - monthly, quarterly or annual payments necessary to maintain coverage.
* Recipient - The individual (s) or entity (eg, trust), which is designated as beneficiary.
* Paid Up - A policy requiring no further payment of bonuses due to prepayment or earnings.
3 How much insurance do I need?
A popular approach to the purchase of insurance is based on income replacement. In this approach, a formula of five to ten times your annual salary is often used to calculate the amount of coverage you need. Another approach is to purchase insurance according to your needs and preferences. The first step is to determine your income needs replacement.
Currently, a large portion of your income goes to taxes (insurance benefits are usually tax-free) and the support of your own lifestyle. Begin by identifying your net income after taxes. Then, add up all your personal expenses such as food, clothing, subscriptions to magazines, clubs, transportation costs, etc. The rest is the annual income you will need to buy to replace him. You want a death benefit amount which, when invested, will provide annual revenues to cover that amount. Then you need to add to that the amounts needed to fund the one-time expenses such as tuition fees for college for your children or mortgage or debt repayment.
Replacement of income for spouses non-active is an important and often overlooked insurance need. The coverage should include costs of day care, household, or nursing. Add to that all the net income of part-time employment.
Finally, your own estimation "final expenses" such as taxes, uninsured medical expenses, and funeral expenses.
4 Other types of life insurance
The survival rate for the life insurance (also known as the last to die or second to die) is a type of single contract that ensures the lives of two people. It pays a death benefit at the death of the second insured. Therefore, it is often less expensive than two individual policies. The survival rate to life is often used for estate planning, it may be possible to leverage potentially today's dollars - through insurance premiums - a death benefit potentially significant that can be used for inheritance tax, to create wealth for future generations, or to benefit a charity. These policies may be available if an insured is "medically uninsurable."
First to die life insurance provides the lives of at least two individuals and pays a benefit upon the death of the first insured. This policy is useful to cover a mortgage or other major debt instrument where there is more than one debtor. In addition, it can be an ideal tool for financing a buy-sell agreement in a business held closely.
5 Conclusion
Life insurance is an important element of good planning. The purchase of insurance involves asking a variety of personal lifestyle and financial issues. If you are not already working with an insurance expert, you might consider the advice of a fee-for-service financial planner who can offer an objective analysis of your insurance options. When you decide what you want, there are many insurance companies solid choice. Check your library or an independent insurance expert for companies with the highest rate among the four rating agencies: AM Best, Duff Phelps, Standard & Poor's and Moody's.
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