Insurance World

Permanent life insurance provides lifetime insurance protection (does not expire), but the premiums must be paid on time. Most permanent policies offer a savings or investment component combined with the insurance coverage. This component, in turn, causes premiums to be higher than those of term insurance. The investment may offer a fixed interest rate or may be in the form of money market securities, bonds or mutual funds. This savings portion of the policy allows the policy owner to build a cash value within the policy which can be borrowed or distributed at some time in the future.

The characteristics of Permanent Life Insurance are: permanent insurance protection, it is more expensive to own; it builds cash value, loans are permitted against the policy; it has favorable tax treatment of policy earnings and it has
level premiums.

There are three basic types of permanent insurance: whole life, variable life and universal life. The two most common are whole life and universal life. Whole life insurance provides lifetime protection, for which you pay a predetermined premium. Cash values usually have a minimum guaranteed rate of interest and the death benefit is a fixed amount. Whole life insurance is the most expensive life-insurance product available. “Universal life insurance separates the investment and the death benefit portions. The investment choices available usually include some type of equity investments, which may make your cash value accumulate quicker. As the you can usually change your premiums and death benefits to suit your current budget”.

Final Tips

• Consider buying a “break point” level of insurance coverage - better premium rates are given at coverage levels of $100,000, $250,000, $500,000 and $1,000,000.

• Make sure you obtain an illustration for the policy that you have chosen. If the insurer will not provide you with one, look for another insurance company.

• Always shop for a level-premium policy. Nobody likes a surprise increase in their premium payments! So, before you buy term or permanent insurance make sure your illustration shows that your premium payment is guaranteed not to increase over the duration of your coverage.

• Don’t be sold on permanent insurance for the investment or cash-value feature. For the first two to 10 years, your premiums are paying the agent’s commission anyways. Most policies don’t start to build respectable cash value until their 12th year, so ask yourself if the feature is really worth it.

• Determine your desired duration of coverage so that you purchase the correct type of policy and keep your premium payments affordable. If you only need insurance for 10 years, then buy term. Also, check out multiple-quality insurance companies for their rates.

• Don’t be taken with riders. A very few number of policies ever pay under these riders, so avoid things like the accidental death and waiver of premium riders since they will only jack up your premiums.

• For 24 hours before your medical exam, keep sugar and caffeine out of your system. It’s best to schedule your exam early in the morning, and don’t consume anything but water for at least eight hours beforehand.

• If your premiums are much too high due to medical reasons or you are denied coverage, check if a group plan is available through your company. These group plans require no medical exam or physical.

When seeking insurance, don’t rush into buying expensive permanent life insurance before considering if term life insurance sufficiently meets your needs. Unfortunately, in many cases the fees charged for policies with investment features far outweigh the benefits. When you purchase life insurance, you’re betting that you’ll live, but also securing peace of mind in case you’re wrong. Don’t leave your family unprotected in the sudden event of your death - after all, they are your most important assets.

When purchasing life insurance there are a number of factors one must consider. First, how much life insurance do I need? Second, what kind of insurance do I need? Third, who should my beneficiary be? Lastly, when should I purchase life insurance? Some of these questions may never enter your mind. However, they are all important to your future.

How much insurance does one person need? Well, this is a hard question. How do you put a value on life? Yet, one must focus on the monetary considerations. How much would the funeral cost? Add to that the amount of wages you earn each year with tips and health benefits. All of this will be have to be replaced to your family. You should also take into consideration and subtract any life insurance you have from employers, banks, and others. However, this should only be done if the life insurance goes to your beneficiary after you die and not if the money is simply to pay off your debts.

Second, you should consider whether you want term or whole life insurance. You see, term life insurance is lower in payments. However, when you cancel term insurance, that is the end. The money then goes to the insurance company. Whole life insurance is a little higher priced. However, you retain a portion of the payment in an investment account. So, each life insurance premium is actually insurance and investments in one payment. The decision is up to you and should be based upon your income, preference, and age.

Now, most people know who they want their beneficiary to be. Yet, have you though of what will happen if your beneficiary is no longer living? It would be wise to name a hierarchy of beneficiaries just in case something should happen to one. In fact, this is especially true for husbands and wives who have a higher chance of dying together.

Lastly, when should I purchase life insurance? This may seem like a dumb question. Yet, there are many young adults who think that they have all the time in the world. In fact, they may have 60 years to go. However, the time to plan is now. In fact, if you invest in a whole life insurance policy, you can have a pretty good sized investment by the time you retire, if you are young. There is no time like the present.

No one expects to meet their end when they are young. Unfortunately, accidents happen and it is better to be prepared so your family does not have to deal with a financial burden on top of your untimely death. What we have to remember is that this planning isn’t to make our lives easier, it is meant to make our deaths easier to our families.