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Life insurance offers peace of mind and financial protection for your loved ones but it’s often misunderstood. There are many common questions about life insurance from our customers, likely the same questions that you have. Whether you're new to life insurance or seeking to deepen your understanding of living benefits, the answers in this guide will help you be better able to navigate the complexities, make informed decisions and be certain that your financial plans align with your financial goals and the needs of those you care about most.
Life insurance is a contract between you and an insurer. You pay premiums and they provide financial security for your loved ones in the event of your death. It covers expenses like funeral costs, debts, living expenses, and education. Some policies also accumulate cash value, serving as a savings option.
There are several compelling reasons to consider life insurance.
Life insurance is simple: you pay premiums to an insurance company in exchange for financial protection for your loved ones. Your policy does come with some unique phrases to understand though.
The main types of life insurance are term life insurance, whole life insurance and universal life insurance. Each type serves different purposes and has unique features, making it important for you to consider your life stages and goals when deciding which to get.
Term life insurance is the simplest and most affordable form of life insurance. It provides coverage for a specified term, often 10, 20 or 30 years. If the policyholder passes away during the life insurance contract term, the death benefit is paid to the beneficiaries.
Whole life insurance, also known as permanent life insurance, provides lifelong coverage. It combines a death benefit with a cash value component, which grows over time.
Universal life insurance is a flexible form of permanent life insurance that offers adjustable premiums and death benefits. It also includes a cash value component.
The right amount of life insurance coverage is as unique as the insured person. You need to strike a balance between providing financial security for your loved ones and keeping your premiums manageable. Here are some common ways to calculate your necessary coverage.
The cost of life insurance varies significantly and depends on several factors. Understanding these factors can help you get a clearer picture of what you can expect to pay for coverage. Here are some of the key elements that influence life insurance premiums.
While it might be more challenging to secure coverage with pre-existing conditions, it is still possible. Some policies do not require a medical check and others will insure policyholders with pre-existing conditions with certain conditions.
It's important to remember that even with pre-existing conditions, obtaining life insurance is often possible and can provide valuable financial protection for your loved ones. While premiums for life coverage may be higher, the peace of mind and financial security it offers can outweigh the costs.
Life insurance relies on consistent premium payments to remain active. To avoid missed payments, set up auto-pay, maintain an emergency fund or communicate with your insurer for solutions during financial difficulties. If a missed payment is inevitable or unexpected, there may be options available to address the situation.
Consequences of missed payments
Life insurance policies can often be adjusted to better align with your changing needs and life circumstances. Here, we'll look at the flexibility of life insurance policies, the process of making modifications and when it might be suitable to make changes.
Policy flexibility
Modifying a policy
When to make changes
Regularly reviewing your life insurance policy is necessary to keep it in line with your goals. These reviews give you the opportunity to reflect on life changes that could impact your coverage needs. By taking the time to review and note these changes, you’ll be able to adjust your premiums and coverage to better represent your current needs. What events should trigger a review?
When you pass away, the death benefit from your life insurance policy is paid out to your designated beneficiaries. The way this payout is structured, and its tax implications, varies depending on your policy and the choices you make. Consult your agent or financial advisor for information specific to you and your policy.
Yes, you can borrow against certain life insurance policies, like whole life or universal life, through policy loans. Policy loans allow you to access a portion of your policy's cash value, which accumulates over time. This is not considered taxable income and typically comes with a lower interest rate compared to traditional loans. However, any outstanding policy loans can impact the death benefit your beneficiaries receive upon your passing. The loan amount plus any accrued interest will be deducted from the death benefit.
Life insurance offers several tax benefits, notably the tax-free death benefit. When your beneficiaries receive the death benefit upon your passing, it's generally not subject to federal income tax. This can provide your loved ones with a substantial financial cushion without any tax implications. To better understand life insurance taxation, consult a tax professional in your state who knows federal and state tax laws and regulations that may apply.
While employer-provided life insurance is valuable, it often has limitations – including coverage that might not fully meet your needs, a lack of customization options and the risk of losing coverage when changing jobs. In contrast, an individual life insurance policy is customizable to suit your needs regarding the type, coverage amount, maximum benefit and beneficiaries. More importantly, individual policies stay with you regardless of job changes, providing uninterrupted protection.
There are several avenues for purchasing life insurance, each with its own advantages and disadvantages. Here are some of them to help you decide which is right for you.
VIU by HUB is in a unique position as an online broker with licensed agents standing by. Unlike some brokers mentioned above, our services are free and our large network of insurance carriers means we can offer you more personalization. No matter how you want to approach buying life insurance, VIU by HUB is here for you. However, if you prefer to do it alone, no hard feelings. In that case, we recommend that you check the financial stability of insurance companies that you are considering and review customer feedback. Taking these steps will help to be sure that your insurance carrier can properly support you through the years. You should also compare quotes from multiple companies to get the best coverage at the best price.
Life insurance doesn't have to break the bank. To save money on your life insurance premiums, consider these tactics.
If you outlive your term life insurance policy, several outcomes and choices come into play. Firstly, your coverage ends and there is no payout. You can renew the policy, although you should expect higher premiums to reflect the fact that you are older than when you first bought it. Alternatively, you can convert your whole term life insurance premium policy into a permanent life insurance policy. This conversion allows you to maintain coverage for life and build cash value within the policy.
You need to carefully evaluate your needs, health status and financial situation when deciding whether to renew or convert. Renewal may be suitable for temporary needs, while conversion provides lifelong coverage and potential financial benefits. Consulting with your insurance agent or financial advisor can help you make an informed decision based on your specific circumstances and goals.
Cashing in a life insurance policy involves surrendering the policy in exchange for its cash value to get immediate access to it. The decision to cash in a policy or keep it is entirely up to the policyholder but surrendering the policy reduces the cash value and terminates future coverage. Carefully evaluate the consequences and explore alternative options, such as policy loans or conversions, before deciding to cash in a life insurance policy.
Remember that when considering life insurance, your needs and circumstances are unique, and you should tailor your policy accordingly. For personalized guidance and additional information about these or any other life insurance questions, insurance brokers like VIU by HUB are here to assist you in making the best choices to safeguard your loved ones and secure your financial legacy. Don't hesitate to reach out for expert advice as you navigate the world of life insurance.
The VIU Point is here to help you make sense of it all, so you can confidently compare auto insurance quotes and make the best policy decisions.
