Life Insurance Basics

Life Insurance Basics Making the decision to purchase a life insurance policy can be challenging for several reasons. Not only are there many different kinds of policies to choose from, but there are dozens of companies with which you can do business. On top of that, it can be somewhat of an uncomfortable experience. You're delving into the dark waters of the worst-case-scenario, where you may not be around to provide for your loved ones. Some people find this to be a morbid endeavor– myself included. After all, no one wants to dwindle too much on their own mortality, it’s not quite the same as setting up car insurance or insurance on your nice new iPhone! This shouldn't prevent you from considering life insurance, however. In fact, I believe that approaching life insurance as a practical financial matter and leaving emotion out of it, is best.  You'll need a clear head when figuring out what's best for your family, especially when you're dealing with commissioned based insurance salespeople. First and foremost, it's important to determine whether or not you actually need a policy. As mentioned above, the main purpose of life insurance is to provide for your family if you die young or unexpectedly. That being said, life insurance is really only for people who have financial dependents. This most commonly includes a spouse whose income is insufficient on its own and children who haven't graduated from college. If you die within the term of your policy, your beneficiary will receive a fixed amount of money. Upon your death a family member will have to provide a death certificate with the date and cause of death. After it's been approved, the indicated beneficiary receives a lump sum. If you do have dependents who you are absolutely certain wouldn’t be able to survive financially without your income, purchasing life insurance could be for the best. Once you've decided that purchasing life insurance is best for your family’s well being the next important step in the process is deciding which policy is best suited for you and your familial situation. There are really two main categories of life insurance policies: Term Life Insurance Policies & Permanent Life Insurance Policies. Term Life Insurance Policies Term Life Insurance Policies are for a fixed amount of time, often 1-30 years. They start out with relatively low rates and high coverage but can get more expensive towards the end. This type of life insurance provides a death benefit– if you were to die within the fixed term, only then would your beneficiaries would receive a lump sum. Otherwise there isn’t a pay out. Permanent Life Insurance Policies These policies are good until you die, whenever that date may be. There are several different types of permanent policies that vary in the kinds of premiums and savings they offer. Consider the following types of permanent policies : A Whole Life policy  has fixed premium and savings components whereas a Universal Life policy allows the holder to shift funds between insurance and savings. A Variable Life policy has a fixed premium gives the holder control over where his savings are invested which can affect the value of the policy and decrease the amount of final death benefit. A Universal Variable Life policy has the flexibility of Universal Life with the control over investments of the Variable Life and the final cash value depends on how well the investments do. As you can see there are plenty of options out there and it’s important that you do your research and explore them all before making your final decision. Talk to your friends and colleagues to see if they have purchased policies and if so what they decided on. Check out some of the insurance companies available to you and get a life insurance quote . Most importantly, talk to your partner and dependents (if they’re old enough) before you make a decision. The more research and communication you do around the subject, the easier it will be to pick the right policy for you.

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Life Insurance Basics