Life insurance is not a subject that many people enjoy thinking about. This type of insurance only pays off when someone has reached the end of his or her life. However, despite any unpleasant feelings about the subject, life insurance is a needed item. Final expenses can be astronomical. Placing the burden on the family who's left behind is not a great policy. Instead, a person can make small premium payments that will cover their burial and other assorted expenses. There are multiple types of life insurance out there, each serving a specific need.
A Simple to Understand Insurance Policy
Term life insurance is the most common type of insurance because it's a straightforward and inexpensive means of handling final expenses. The premium costs for term life insurance are calculated based on actuarial tables that calculate a person's mortality rate. For example, a twenty-year-old male in excellent health who does not smoke pays a very low premium. A seventy-two-year-old person who smokes and has diabetes pays a high premium. Term life insurance involves a premium payment and a term for those payments to be made. The premiums you pay are expenses and do not accrue any type of cash value like whole life policies do.
Enjoy Low Cost
Term life insurance has the lowest possible cost compared to alternatives. Permanent insurance policies cost much more initially but have a different set of benefits. The only benefit of term life insurance is the death benefit. This is the payment to your beneficiaries that's paid at the time of your death. Permanent policies, on the other hand, accrue cash value on the payments you make. You can borrow or cash in those policies if needed. Young people benefit from buying term insurance. The chances are high that they will not need to use the death benefit, so they can save significantly on premiums, which can be used for other expenses. They can also buy a huge benefit for a small amount of money. This money can really be useful if a tragedy were to strike. The beneficiary could pay for living expense as well as final expenses. For a family with young children, the loss of income from the primary breadwinner could be devastating without term life insurance. You can even calculate expenses like university tuition and cover those. The costs are low enough that you easily afford the premium payments.
What Happens When Your Term Ends
Make sure you understand what happens at the end of your term. If the term ends and you still need term life insurance, you may be able to renew. Since you're older, and term life insurance prices are based on your age, the chances are good that you'll have to pay more for the same amount of coverage. At this stage of the game, you may have to take another medical exam, especially if it been years between the time you took out the first policy. If you have developed any afflictions, this could impact your rates significantly. In a severe case of a decline in your health, you may no longer be able to qualify for insurance at all. If you think that not much is going to change in a reasonable period of time and you don't need long-term insurance, then term life insurance could be the best choice for you. Term life insurance is renting insurance, whereas permanent policies are similar to owning. The analogy works well for several reasons, included the policy you owns build an equity value.
Shop for the Best Rates Around
Don't be afraid to shop for the best rate on term life insurance. There are numerous companies that offer similar policies, and their rates vary greatly. Some of them may value your business more than their competitors do. Each company maintains its own actuarial tables that are based on their direct experience. If you fit a profile that they have success with, they could offer you a competitive rate.
Get the Right Amount of Insurance
Determining the proper amount of insurance for yourself is never an easy task. You'll need to consider your income, final expenses, and anything else you have in mind. Many people buy term life insurance to fill in gaps that the rest of their financial plan has. An obvious example is buying life insurance to pay estate taxes. You may want to consider what other property will go to heirs at the time of your passing. Calculate what immediate impact your death will have on your family. You may want to add up costs like lost income, final expenses, estate taxes, and anything else you can come up with. A term life insurance policy is one of the fastest ways to leave an estate to your beneficiaries. All they have to do is present your death certificate to the insurance company to receive their benefits. This is a fast resolution at what is most likely a stressful and confusing time in the lives of your loved ones. Life insurance is something that can ease their pain and lift the burden of their suffering. That's the real reason that people buy this financial product in the first place. They don't want their loved ones to be burdened by having to pay for an expensive funeral at such a difficult time.
At the very least, make sure you have adequate death benefits to pay for your funeral. Nobody wants to get hit with a large bill that could have been easily taken care of. Even if you buy a small policy, do so with the thought that it will cover the most basic necessities. That will make the entire funeral much easier to deal with for those you leave behind. You can get a policy, no matter what condition you are in. You may have to pay more, but it could be worth it if in the end. Life insurance is one way to take care of these important issues.