This web site is intended to be used as a tool to help teach the basics and have this material available for easy reference. The following is an introduction into life insurance:
The BasicsWhy do I need Life Insurance?
Life insurance is an essential part of financial planning. One reason most people buy life insurance is to replace income that would be lost with the death of a wage earner. The cash provided by life insurance also can help ensure that your dependents are not burdened with significant debt when you die. Life insurance proceeds could mean your dependents will not have to sell assets to pay outstanding bills or taxes. An important feature of life insurance is that generally no income tax is payable on proceeds paid to beneficiaries. The death benefit of a life policy owned by a C corporation may be included in the calculation of the alternative minimum tax.How much Insurance do I need?
Before buying life insurance, you should assemble personal financial information and review your family's needs. There are a number of factors to consider when determining how much protection you should have. These include:
Although there is no substitute for a careful evaluation of the amount of coverage needed to meet your needs, one rule of thumb used is buy life insurance that is equal to five to seven times annual gross income.
If you want to be more precise, take the time and complete the Needs AnalyzerChoosing A Plan
Buying life insurance is not like any other purchase you will make. When you pay your premiums, you're buying the future financial security of your family that only life insurance can provide. Among its many uses, life insurance helps ensure that, when you die, your dependents will have the financial resources needed to protect their home and the income needed to run a household.
Choosing a life insurance product is an important decision, but it often can be complicated. As with any other major purchase, it is important that you understand your needs and the options available to you.
The main types of life insurance available
are term and permanent. Term insurance provides protection for a specified
period of time. Permanent insurance provides lifelong protection. To
learn more about term and permanent insurance click on the appropriate
button at the top of this page..
1. What happens if I fail to make the required payments?
If you miss a premium payment, you typically
have a 30- or 31-day grace period during which you can pay the premium.
After that, the policy will lapse. You may be able to reinstate with evidence
of insurability depending on your policy's provisions. If your policy
has sufficient cash value, the company can, with your authorization, draw
from a permanent policy's cash surrender value to keep that policy in
force. This does not apply to term insurance because there is no cash
value to draw from. In some flexible premium policies, premiums may be
reduced or skipped as long as sufficient cash values remain in the policy.
However, this will result in lower cash values.
Provisions or riders that provide additional benefits can often be added to a policy. One such rider is a waiver of premium for disability. With this rider, if you become totally disabled for a specified period of time, you do not have to pay premiums for the duration of the disability.
3. Are other riders available?
4. When will the policy be in effect?
If you decide to purchase the policy, find out when the insurance becomes effective. This could be different from the date the company issues the policy.
5. How do accelerated death benefits work?
It allows policyholders to receive all or part of the policy's proceeds prior to death under certain circumstances, including the need for long-term care and confinement to a nursing home. Because payments may affect tax status and Medicare eligibility, and will be deducted from the overall benefits paid later to beneficiaries, policyholders should thoroughly investigate options in advance.
6. By using medical tests are insurers trying to eliminate any applicant likely to develop a serious health condition?
Medical tests can provide accurate and current information about an applicant's health, thus enabling insurers to charge premiums that reflect the level of risk an applicant represents. Because some health conditions are easily managed through proper medication, therapy or lifestyle changes, medical information sometimes makes it possible for insurers to cover applicants who might not otherwise be insurable. More serious or incurable conditions present an enormous risk that an insurer simply cannot assume.
7. What should I consider in naming life insurance beneficiaries?
8. Does it make sense to replace a policy?
9. As a single person, do I need insurance?
The answer almost always is yes. You may want to consider these options: