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In
this guide-
+
Background on life insurance
+ What are the important features of life insurance?
+ How to choose the best life insurance for me?
Background
on life insurance
The primary purpose of life insurance is to replace the
loss of income that occurs when someone dies. This is
usually the head of household or the person who produces
the primary income for a family situation, but can also
be purchased to cover lost income for secondary income-earners,
for non-income-producing spouses, and even for children
to cover funeral costs. Life Insurance is a contract between
the insured person and the insurance company (or carrier)
that is providing the insurance coverage. If the insured
dies while the policy is in force, the insurance company
pays a specified sum of money to the person or persons
named as beneficiaries. Federal and state tax laws allow
all life insurance payments that are made to beneficiaries
to be free of any income tax.
The
amount you will pay for life insurance is determined by
the likelihood of your death as you fall into a statistical
category. For example, if you are a male, non-smoker between
the ages of 39-49, you fall into that demographic category,
which has it's own premium based on the mortality rates
of that group. A female smoker between the ages of 19-29
will fall into a different category, and will be charged
a premium based on that demographic group. To obtain life
insurance, you will usually need to have a health check
to determine your risk to the insurance carrier. The healthier
you and your lifestyle are, the lower your premiums will
be.
What
are the important features of life insurance?
There are many kinds of life insurance, but they all fall
into two main categories- term and permanent (whole, variable,
universal and universal variable fall into this category).
Term Life Insurance
Term life insurance offers death benefits during a limited
and defined number of years and expires without any residual
value if the insured survives the stated period. Term
life insurance is comparatively less expensive than whole
life insurance, and policyholders usually choose a term
that coincides with a period of their lives that other
people are relying on their income. A very common scenario
is for the main wage earner of a family with kids to purchase
a twenty-year policy that provides coverage until the
child(ren) reaches college, at which point coverage is
typically not needed to the same degree.
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