subject: Life Insurance – Some Facts That Need Prior Consideration [print this page] Does the very mention of a life insurance policy make you uneasy? Does it remind you of death and a journey into an unknown world, a world about which you do not know anything? Set such a thought aside. Buying a life insurance policy does not mean that you are going to die early. Very few people actually do that.
Buy a suitable life insurance policy to live in peace. Being covered means that if indeed you die a premature death, your family will not face any financial problem. Indeed, an ideal life insurance policy should replace the income of the main breadwinner incase of his premature death so that all the responsibilities that were earlier covered by his income is now covered by it. Moreover, if there is any newer challenge to meet, the coverage amount should be able to cover that also.
However, it is important for the premiums to be affordable and at the same time, you should not concentrate on affordable premium only. The death benefit has to be adequate too. Therefore, you should look for a life insurance policy that has low premium rates, but high death benefit.
We also have to consider whether we really need a life insurance policy. If the person is not the primary income earner of the family, then it's not necessary for that person to be a policy holder but if there is someone who would undergo the pains of financial strain upon your death, then the answer is an affirmative.. .And you need to carefully ponder upon what is best for your family and loved ones. Families with small children should always keep contingency plans for the future needs, so a policy is essential. In families where both spouses work also needs insurance policy. Anyway, the news of death of a loved member of the family is always traumatic and we need to deal with it. but along with the pain of bereavement, if there is financial instability also it becomes very difficult to deal with. So opting for a life insurance policy during the good times is always a safer bet for all.
Basically, there are various types of life insurance. And deciding upon the type of the policy involves a series of decisions like naming a beneficiary, choosing a type of policy, the range of coverage it provides etc.
Types of Life Insurance:
Term Life Insurance
Permanent (Whole) Life Insurance
A term life is a temporary life insurance policy that provides coverage for a specific period or term. Such a term generally range from one to thirty years. Remember, death benefit can be claimed only if the insured dies within that specific period. No claims can be placed if the insured survives the term even by a day. Once the term is over, you can either live uncovered or buy new coverage. However since the rates increase with age, if you want to buy new coverage, you have to buy them at higher rate. Therefore, as far as term life is concerned deciding on the correct term is also vital.
There are different kinds of term life insurance too. You can buy instant term life insurance by paying a little extra. These policies exempts you from taking the mandatory medical test and therefore are partially underwritten. On the other hand, fully underwritten policies are cheaper, but take long time to complete the underwriting procedure. Some such policies are:
Yearly renewable term life is bought for a year only, but with compulsory renewable clause attached to it
Level term life insurance is bought for 5/10/15/20/25/30 years; the premium stays level through out the term
Decreasing term life insurance is even more cheaper because the face value keeps decreasing over the years
Convertible term life insurance is slightly more expensive because you can convert them into a permanent policy at any point of time
There are many types of permanent policies too. Such policies have two values. If the insured dies, the face value of the policy is paid as the death benefit. However, you can also receive the cash value of the policy by surrendering the policy in your lifetime only. Remember, such policies build up cash value because you pay for it and therefore consider all pros and cons before opting for it.
Life Insurance Some Facts That Need Prior Consideration
By: David Livingston
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