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If it is not already part of your long term financial planning strategy it is our hope that after reviewing this section Life Insurance becomes a number one priority.

Although death is the last thing on minds of most consumers it is a real and present fact that death can be costly to the loved that are left behind. Funeral and Burial expenses are the most immediate items to resolve after a death but things such as estate taxes, outstanding debts and unpaid medical bills can prove to be a persistent problem. Your dependents are immediately affected by lack of your income to rely on. Having a life insurance policy may not immediately resolve these issues but it can definitely ease the transition. Currently there are over 1,500 companies to choose from when purchasing Life Insurance. Here is what you the consumer needs to know:

The Basics


How can life insurance help me?

How much insurance should be purchased?

Policy Options

What are the different types of life insurance?

When should I consider purchasing Term Life Insurance?

What are the different types of Term Life Insurance

When is the right time to purchase Permanent Life Insurance?

What are the different types of Permanent Life Insurance?

Helpful Tips on saving money on Life Insurance!


How can life insurance help me? ↑TOP↑
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It is generally a cost-effective way to provide for your loved ones after you are gone. It can be an important tool in the following ways:

1. Income replacement
For most people, their key economic asset is their ability to earn a living. If you have dependents, then you need to consider what would happen to them if they no longer have your income to rely on. Proceeds from a life insurance policy can help supplement retirement income. This can be especially useful if the benefits of your surviving spouse or domestic partner will be reduced after your death.

2. Pay outstanding debts and long-term obligations
Consider life insurance so that your loved ones have the money to offset burial costs, credit card debts and medical expenses not covered by health insurance. In addition, life insurance can be used to pay off the mortgage, supplement retirement savings and help pay college tuition.

3. Estate planning
The proceeds of a life insurance policy can be structured to pay estate taxes so that your heirs will not have to liquidate other assets.

4. Charitable contributions
If you have a favorite charity, you can designate some of the proceeds from your life insurance to go to this organization.
Along with your savings and investment strategy, life insurance should be part of your long-term financial planning.

How much insurance should be purchased? ↑TOP↑
You may not like to think about it, but your death can be costly to your loved ones. At the very least, there will be funeral and burial costs. There may also be estate taxes and outstanding debts to pay, such as medical expenses not covered by health insurance. If you have dependents, they will have to cope with these costs while no longer having your income to rely on. The proceeds from a life insurance policy can be of tremendous value at this time. It will provide economic assistance to your family so they can pay off the mortgage, college tuition and other ongoing expenses and maintain their current lifestyle.

There are many choices when it comes to life insurance and over 1,500 insurance companies to choose from, so it is important to work with a knowledgeable insurance agent or company representative. While there a many different types of life insurance policies, they generally fall into two categories – term and permanent.

What are the different types of life insurance? ↑TOP↑

While there a many different types of life insurance policies, they generally fall into two categories – term and permanent.
Term
Term Insurance is the simplest form of life insurance. It provides financial protection for a specific time, usually from one to 30 years. These policies are relatively inexpensive and are well suited for goals, such as insurance protection during the child-raising years or while paying off a mortgage. They provide a death benefit, but do not offer cash savings.
Purchasing term insurance is like renting a home. It is a short-term solution. Monthly costs are usually lower, but you will not be building equity. Just as many people rent (while saving to buy a home), individuals who need insurance protection now, but have limited resources, may purchase term coverage and then switch to permanent protection. Others may view term insurance as a cost-effective way to protect their family and still have money to put into other investments.

Permanent
Permanent insurance (such as universal life, variable universal life and whole life) provides long-term financial protection. These policies include both a death benefit and, in some cases, cash savings. Because of the savings element, premiums tend to be higher. This type of insurance is good for long-range financial goals.
Purchasing permanent insurance is like buying a home instead of renting. You are taking care of long-term housing needs with a long-term solution. Your monthly costs may be higher than if you rent, but your payments will build equity over time. If you purchase permanent insurance, your premiums will pay a death benefit and may also build cash value that can be accessed in the future.

When should I consider purchasing Term Life Insurance? ↑TOP↑

If you need life insurance for a specific period of time, term insurance should be considered. It provides insurance protection from one to 30 years and is generally the least expensive form of life insurance. If you die during the term of the policy, your beneficiary will be paid the amount of money specified in the policy. If you are still alive at the end of the term, coverage stops unless the policy is renewed. Unlike permanent insurance, you will not build equity in the form of cash savings.

Term insurance can be a useful financial tool for:
Those who need a large amount of life insurance, but have a limited budget, such as a young couple, with children.
Covering debts that will disappear in time, such as a mortgage or car loan.
Business owners who want to cover the life of a key employee for a specific number of years.

Keep in mind that premiums are lowest when you are young and increase upon renewal as you age. Some term insurance policies can be renewed when the policy ends, but the premium will generally increase. Many policies require a medical examination at renewal to qualify for the lowest rates. Before deciding on a policy from a specific company, find out what their requirements are. Also, see if you would be able to convert the term policy to a permanent policy later on.

If you think your financial needs will change, you may also want to look into “convertible” term policies. These allow you to convert to permanent insurance without a medical examination in exchange for higher premiums.

What are the different types of Term Life Insurance ↑TOP↑

1. Renewable Term Insurance.
This policy allows you to renew coverage at the end of the term without having to submit medical information. The company renews your policy even if your health has deteriorated. However, the premium rate will usually rise with each renewal.

2. Convertible Term Insurance.
You can convert your term coverage into a permanent policy without providing evidence of insurability (usually a medical exam). Premiums for convertible policies are usually higher than for nonconvertible policies. Once converted, the premiums for the permanent coverage will be higher than those you are currently paying for the term policy for the same death benefit. However, the premiums for the permanent policy will now remain the same while the term premiums will continue to rise on renewal.

3. Level Term Insurance.
These policies provide a fixed premium for a certain number of years, usually 10 or 20 years, while the death benefit remains unchanged. The advantage is that you lock in a certain rate for the period of the policy. The disadvantage is that rates will jump considerably if you want to renew with another level policy.

4. Decreasing Term Insurance.
The death benefit in this type of policy decreases over its term. For example, you might start with $100,000 of coverage and the amount of coverage would decrease by $10,000 each year for 10 years. The premium will vary over the term of the policy. This policy is no longer sold very often.

When is the right time to purchase Permanent Life Insurance? ↑TOP↑
A permanent life policy provides lifelong insurance protection. The policy pays a death benefit if you die tomorrow or if you live to be a hundred. There is also a savings element that will grow on a tax-deferred basis and may become substantial over time. Because of the savings element, premiums are generally higher for permanent than for term insurance. However, the premium in a permanent policy remains the same, while term can go up substantially every time you renew it.

There are a number of different types of permanent insurance policies, such as whole (ordinary) life, universal life, variable life, and variable/universal life. In a permanent policy, the cash value is different from its face value amount. The face amount is the money that will be paid at death. Cash value is the amount of money available to you. There are a number of ways that you can use this cash savings. For instance, you can take a loan against it or you can surrender the policy before you die to collect the accumulated savings.

There are unique features to a permanent policy such as:

You can lock in premiums when you purchase the policy. By purchasing a permanent policy, the premium will not increase as you age or if your health status changes.

The policy will accumulate cash savings. Depending on the policy, you may be able to withdraw some of the money. You also may have these options:

Use the cash value to pay premiums. If unexpected expenses occur, you can stop or reduce your premiums. The cash value in the policy can be used toward the premium payment to continue your current insurance protection – providing there is enough money accumulated.

Borrow from the insurance company using the cash value in your life insurance as collateral. Like all loans, you will ultimately need to repay the insurer with interest. Otherwise, the policy may lapse or your beneficiaries will receive a reduced death benefit. However, unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions.

What are the different types of Permanent Life Insurance? ↑TOP↑

Whole or ordinary life
This is the most common type of permanent insurance policy. It offers a death benefit along with a savings account. If you pick this type of life insurance policy, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. The savings element would grow based on dividends the company pays to you.

Universal or adjustable life
This type of policy offers you more flexibility than whole life insurance. You may be able to increase the death benefit, if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in your account, you will also have the option of altering your premium payments – providing there is enough money in your account to cover the costs. This can be a useful feature if your economic situation has suddenly changed. However, you would need to keep in mind that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end. You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.


Variable life
This policy combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow more quickly, but you also have more risk. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level. Variable-universal life If you purchase this type of policy, you get the features of variable and universal life policies. You have the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.

Helpful Tips on saving money on Life Insurance! ↑TOP↑

When purchasing life insurance, you should look for the best policy for your needs at the most competitive price. Here are ways to maximize your life insurance dollars:

1. Shop around for the best price
There are thousands of companies selling life insurance. Get the names of several reputable insurers with solid financial ratings. Then compare price and coverage. Get a least three quotes on comparable policies.

2. Buy the right amount of insurance
Work with a knowledgeable life insurance agent to determine the amount and type of insurance you actually need to provide for your loved ones.

3.Look for guaranteed renewal policies, if you buy term insurance
That way, you won’t have to shop for a new policy (with higher premiums) when you are older.

4.Buy a policy while you are in good health The best time to get a good price is when you are in good health. Don’t wait until you develop medical problems to consider purchasing life insurance.

5.Take care of yourself
Don’t smoke. Maintain a healthy weight and exercise regularly.

6.Look into group insurance
Consider participating in your employer-sponsored life insurance program, even if you have to contribute to it financially. Known as group insurance, this can be less expensive than comparable plans offered outside of work. You may be able to obtain coverage up to a certain level without providing evidence of good health, a key advantage for many people. Additionally, many plans are administered through payroll deduction, which can be an added service - if you are not good at bill paying. Lastly, many plans allow you to continue your coverage after you leave your employer by continuing to pay premiums or converting the coverage to an individual policy.
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