Life Insurance

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Life
insurance

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What is life insurance, and why is it necessary for me?

Life insurance allows you to provide for your family. It pays them a quantity of money that could protect them from the financial consequences of your death.

Life insurance can be a crucial component of retirement planning, providing your family with peace of mind and financial security.

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How can life insurance protect my loved ones?

The funds provided by life insurance can be used to pay off debts and final expenses, replace lost income, and transfer wealth.

Which form of life insurance best fits my needs?

When you understand the different types of life insurance and what they are designed to do, it is easier to find a policy that fits your needs.

Answer the following questions when determining the appropriate form and amount of life insurance:

What do you wish the policy to cover?

How much coverage do you require?

How long will you need protection?

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How do I determine if I qualify for life insurance?

Obtaining life insurance begins with filling out an application.

Once completed, the application is sent to the carrier where their underwriters will evaluate your medical history to determine whether your application is acceptable and to determine your risk category.

In addition, you may need a medical exam depending on what type of life insurance you are applying for.

In general, the younger and healthier you are, the lower your life insurance premiums will be.

What factors determine the cost of life insurance?

Some life insurance policies undergo underwriting, which is the process of evaluating the insured's exposure to risk.

Depending on the sort of life insurance policy selected (term, whole life, or universal life), premiums may vary.

Your insurance premium will be influenced by the quantity of coverage you request, your age, gender, and risk classification.

Tobacco use, health or medical history, and risky hobbies or occupations are additional hazards that can affect costs.

More than just protection

Life insurance can help ease financial pressures for family members in the event of an unexpected death. But it can do so much more besides that, with features and options that can protect you while you’re living.

That’s why life insurance is a valuable planning tool, as part of an overall financial strategy or stand-alone protection. With it, you can secure your dreams and take care of those you love.

What life insurance can do for you

Life insurance can provide financial protection for your beneficiaries, for both personal and business reasons. In the event of your death, the benefit payment can help meet the long-term protection needs of your beneficiaries.

Long-term protection needs

Family income replacement

Life insurance benefits can help survivors maintain their standard of living, despite the loss of your earnings.

Mortgage protection

Death benefits can be used for mortgage payments or paying off the balance so your family can stay in their current home.

Children’s education

A properly structured life insurance policy can provide college funding in the event of your death.

Retirement income for your surviving spouse

Insurance benefits can help a surviving spouse continue saving for retirement.

Business protection and continuation

A “buy/sell” agreement funded with life insurance proceeds can be a powerful tool for business continuity.

Estate planning

Death benefits can cover estate taxes and other liabilities so that survivors can avoid the sale of a home or business.

Two basic types of life insurance

Term Life is a less expensive choice that provides only death benefit protection for a specific period of time.

Permanent Life may provide more value in addition to death benefit protection and coverage can last a lifetime.

Understanding term life insurance

Term life insurance provides pure death benefit coverage for a specific period of time and is usually a less expensive option than permanent life insurance.

Term Life

Enables you to purchase just the amount of death benefit coverage you need and can be a good choice when you know your need for coverage will disappear in the future.

Pros

· Typically the least expensive life insurance

· Purchase only the amount of coverage that you need

Cons

· No cash value for you to access

· Renewal premiums can be expensive if you extend coverage beyond your term

· Extending or converting your policy may include additional medical or underwriting requirements

Consider term life insurance if you have:

· A limited budget

· A family with young children

· Short-term insurance needs

· A need to supplement an existing life insurance policy

Understanding permanent life insurance

Permanent life insurance can provide flexible, lifelong protection as long as required premium payments are maintained. Each type of coverage offers its own advantages and disadvantages.

Whole Life

This straightforward policy features a level premium, and offers both a death benefit and cash-value potential.

Universal Life

Offers more flexibility around the death benefit amount, premium payment amount and optional features.

Pros

· Fixed interest rate

· Cash-value growth and access

· Lifetime death benefit coverage

· The most flexible

Cons

· Typically the most expensive

· Interest rate may be lower than other investments

Consider permanent life insurance if you want:

· Your life insurance coverage to last a lifetime

· Both life insurance protection and tax-advantaged cash-value growth

· Access to your policy’s cash value through loans or withdrawals for estate planning, wealth transfer or retirement planning

· A solution for advanced planning such as business continuation or key person protection.

Life is complicated —protecting it shouldn’t be

Life insurance is a valuable financial tool because it can be tailored to your specific needs.

Work with an insurance professional to develop a strategy for determining which type of life insurance will be best for you, now and down the road.

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Frequently Asked Questions

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1. Why is life insurance important?

Life insurance is versatile; it can be used to pay for a funeral/final expenses, can be left to loved ones for financial security, can protect an employer, or leave a legacy.

2. When to get life insurance?

The younger you are is preferable since you are typically healthier.

The older you get the more likely it is that you will develop conditions that will affect your ability to be approved for life insurance.

3. What is term life insurance?

Term life insurance can be thought of as “renting” life insurance.

It will not be permanent, and it will only be over the course of a date range (10, 15, 20-year policies).

4. What is whole life insurance?

Whole life insurance can be thought of as permanent insurance.

This type of insurance the premiums will not go up and is a contract between you and the carrier for a set face amount.

5. What is a beneficiary for life insurance?

A beneficiary is someone who will receive the face amount of the life insurance (death benefit).

This can be a person, charity, trust, or estate. If a minor is to be named a beneficiary there are certain rules that will need to be followed and can vary by state.

6. Who needs life insurance?

Everyone! If you are a college student, a parent, grandparent, key employee, self-employed, etc- everyone can benefit from a life insurance policy.

7. At what point does a whole life insurance policy endow?

Typically there is a specific year that will be mentioned in the policy. If the policy reaches that year the policy will endow, usually 100 years.

8. What is index universal life insurance?

Indexed Universal life insurance (IUL) are policies that can act both as life insurance and a cash accumulation product.

These permanent policies offer not only a death benefit, but also a cash value allocation that can be used to pay premiums for the policy or be withdrawn to act as a self-loan.

In short, think of it as a life insurance policy that creates wealth.

9. When does a life insurance policy typically become effective?

A life insurance policy will become effective once the entire application process has been completed.

Once the carrier approves the application, you sign the policy, and pay the first premium-the policy will become effective.

Depending on what type of life insurance you get, some policies will take longer than others.

10. What factors impact the cost of your life insurance premium?

Factors such as age, gender, nicotine/smoking, health history, prescription drugs, etc can all affect life insurance premiums.