Insurance for Everyday Living: Life Insurance

Gaurav Bhola, MSM, Managing Editor

Want to turn a smile upside down, just mention the word insurance to someone. The word insurance sends shudders through people, but sometimes insurance is necessary. As consumer needs have changed over time, so have the products offered by insurance companies. There are many flavors for each type of insurance such as, life insurance, health insurance, car insurance, business insurance, home insurance, travel insurance, disability insurance, medical insurance, and more. It is critical that you get the appropriate coverage to protect yourself, your family, your finances, and any business.

If you don’t like insurance, just take it as if you would take bitter tasting medicine, you may not like taking it but it is good for you. The essential insurances to consider are health insurance, disability insurance, life insurance, auto insurance, and homeowner/renters insurance. Today, we cover Life Insurance.

What is it:

  • Life insurance provides loved ones protection against financial loss resulting from the insured’s death
  • Insurance company pays your beneficiary a specific amount of money, usually the face value of the policy when you die in exchange for your timely payment of premiums

The choices:

  • Term Insurance - the least expensive form of life insurance pays your beneficiary or beneficiaries a death benefit if you die while the insurance is in force
  • Term - covers you only during the term of the policy, usually 10, 15 or 20 year term.
  • Term – premium is level, the same for the length of policy
  • Term – however, if you live past the term of the policy period and don’t renew your policy (option not available on some policies), your coverage ends
  • Permanent Insurance - life insurance such as whole life or endowment, policy lasts the insured’s lifetime, the death benefit paid when you die (policy must be current) and the policy accrues cash value
  • Types of Permanent Insurance – Whole Life, Universal Life, Variable Life, Variable Universal Life

Which choice works for me

Insurance through work:

  • If insurance is offered through work, take advantage of it
  • Usually, 1 time or 2 times your pay is offered at no cost. You can purchase more, if offered.
  • Getting insurance through work doesn’t require underwriting

Amount Needed:

When seeking the amount needed, consider these factors:

  • Short-term debt
  • Long-term debt
  • Auto loan
  • Home loans
  • Credit card debt
  • Other financial obligations
  • Cost of college for any children

Personal Insurance Policy:

  • If you determine you need more insurance to protect your loved ones, then get a personal life insurance policy
  • Have to go through medical underwriting.
  • Term Insurance – is best option for majority of Americans, more than 90 percent
  • Term – is cheap, Buy Term and Invest the Rest.
  • Permanent – If you are affluent, consult your tax advisor of possible tax benefits
  • Permanent – good tool for estate planning for the affluent

How it can help you

It is important to have life insurance for the following reasons:

  • Pay final costs: covered expenses include all funeral costs, estate administration and probate costs, medical fees and other debts
  • Provide for your loved ones: create an inheritance for your loved ones by getting a life insurance policy and naming them as beneficiaries
  • Give to your favorite charity: make the charitable contribution to your charity, make the charity your life insurance beneficiary
  • Life insurance is a great tool for successful long-term financial planning for you and your family

Life insurance is one of the cornerstones of successful financial planning. It is of critical importance that you get the proper amount, no too little and not too much. If you get too little, then it defeats the purpose of getting life insurance in the first place, to provide a death benefit, so that your beneficiaries are taken care of. If you get too much, then you are paying extra money to the insurance company that you could have used towards other life goals. So, it is important for you to find the proper balance in the amount of life insurance you get.

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