What Do I Need To Know About Life Insurance?
Life insurance can be purchased by anyone whenever they feel. However, most people who buy insurance experience chronic diseases, but it is easier to get insurance when you are young and healthy. Your lifestyle may make your premiums higher, like participating in skydiving or using tobacco. Depending on the budget you set, there is always a life insurance policy that will suit you. Life insurance can be accessed at any time, but if you are ill, then it might be the right time for you.
People who cannot pass a medical exam can still qualify for life insurance policies.
Life insurance is a great way for someone to ensure that their family is financially secure in the event that they would pass away prematurely. From paying for final expenses like a funeral to ensuring that their family would have the means to afford their major finances like mortgage payments, a life insurance policy can help ease the financial strain of losing a loved one and buy them extra time to readjust their lives financially.
For people who want or need a life insurance policy but know they are unable to pass a medical exam, finding a life insurance policy can feel impossible. However, that’s not the case—plenty of life insurance carriers offer life insurance policies without a medical exam. For people with pre-existing medical conditions or people who may have a fear of going to the doctor, there are still policy options available so that they can rest assured knowing they have a level of financial protection for their families should they pass away prematurely.
Types of Life Insurance
There are several types of life insurance, depending on your needs and preferences. Also, other factors, such as premiums, influence the type of life insurance you purchase. The types of life insurance include:
Short term life insurance lasts for a specific number of years, then it expires. You can select the term you want for the policy, It can either be 10, 20, or 30 years depending on what suits your budget. If you need a quote on a cheap term life insurance, it is a very easy process.
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A level term policy has a similar amount of premiums paid annually.
Increasing term premiums increase as your age increases. A young person pays less, and as they get older, they pay more. Each year the premiums are renewed.
With permanent insurance, the insured pays premiums throughout their lives unless the policyholder cuts the policy by either stopping the payments or surrendering the policy. This is expensive compared to term life insurance.
The policyholder of a single premium policy is required to make one payment instead of the monthly or annual payments.
Whole life insurance is a form of permanent life insurance. The policy accumulates cash value.
Universal life is also a permanent life insurance policy in which the cash value earns interest. The premiums are quite similar to those of Term Life Insurance. However, the difference comes in adjusting premiums and death benefit, which is in the Universal life Insurance.
Guaranteed universal is a form of universal life insurance which has no cash build up. The premiums are lower compared to whole life insurance.
In a variable universal policy, the policyholder earns a fixed rate of return on the premium value.
Burial or final expense insurance is a form of life insurance that comes with a little death benefit. The beneficiaries have the freedom of using the death benefit in whatever way they want.
Guaranteed issue is permanent life insurance taken by people who have health issues that may make them uninsurable by other insurance types. Notably, the insurance does not pay death benefits if a person dies in the first two years after taking the insurance except if the death is accidental.
Are the Proceeds of Life Insurance Taxable?
One of the most frequent questions asked about life insurance is: Is life insurance taxable? What to note is that life insurance proceeds are not taxable. The money is disbursed to your beneficiaries without any taxation. Notably, in some cases, taxation comes into the picture. An example is in total payouts where the beneficiaries are taxed on the interest accrued if they go for an installment plan or the estate size if your estate is bigger than the estate tax.
How Much Life Insurance Should I Buy?
Life insurance depends on the budget you have set aside. However, many insurance companies advise a person to get life insurance, which should be about six to ten times your annual salary. Alternatively, you can multiply the number of years you have left to retire by the annual salary you get to know how much to spend on insurance.
How Long Do I Need Life Insurance Coverage?
Life insurance coverage depends on whether you are supporting dependents, if you have any mortgages and whether you have any debts. If you are supporting your children, siblings, or aged parents, you should consider a 20-30 year term life policy if there are little children. However, if it’s for older children, then a ten-year term life insurance will be suitable.
The time required to pay your remaining mortgage should be the time your life insurance policy covers. This will help your dependents cover their bills and pay for the house bills.