Information about life insurance policies, coverage, deductibles, and costs.
Who needs life insurance?
Unlike auto insurance, life insurance is not a mandatory insurance. However, many employers offer life insurance as part of a benefits package. In addition life insurance is offered through clubs and organizations such as AAA or AARP. You can also purchase life insurance independently through an insurance agent or life insurance broker.
The size (or value) of a life insurance policy can vary tremendously. If you are a young person with little or no debt and no children, life insurance’s premiums can be very inexpensive and policies usually cover the price of a funeral and related expenses in the event of your death.
If you are married, have dependent children, a mortgage, and other significant debt, a larger life insurance policy could cover those debts and protect the people you leave behind from financial responsibility for those debts. If you are the spouse of a loved one who passes away, a life insurance policy could provide money for mortgage payments, children’s education, and other expenses. If you have a single income family, and the wage earner dies, a life insurance policy could also provide much needed steady income through an annuity.
Determining the Cost of Life Insurance
When you apply for life insurance you are asked a series of questions which include your age, sex, medical history, and any current health conditions. You may also be asked questions about your lifestyle such as “do you smoke?” An insurance actuary then takes your profile and adds it to a group of people who share similar information as you. A calculation is made to see how many people in your group are likely to die and when. Based on that information your premium and available coverage is determined. The more people in your group that die, the higher you can expect the insurance premium to be. As you can imagine, life insurance premiums are usually less expensive for younger people and become increasingly expensive the older you are when you apply.
Two Popular Kinds of Life Insurance
There are two popular types of life insurance: term life insurance and whole life insurance.
Term life insurance is just as it sounds; you buy life insurance for a specific term (or amount of time). If you buy a 10 year term life insurance plan and you die within that 10 year period, your life insurance benefits will kick in and cover the terms outlined in the policy. If you die 11 years after purchasing the 10 year term life insurance, none of the insurance coverage you purchased or paid for in the 10 years previous will cover any expenses. Your coverage ends when your term ends. You can purchase additional term life insurance policies as each expires, but a term policy usually means there is not continuous coverage. You may also have to re-qualify every time you purchase a new term policy, meaning that most likely your monthly premiums will be increased each time you renew. This is because as you get older, your chance of dying increases. If you have a dramatic change in your health, such as developing a chronic condition or terminal disease, you may not qualify for a term life insurance policy at all. Generally, term life insurance does not build up any cash value. This is why it is a low cost option for younger people without substantial debt or dependants.
Whole life insurance is a policy you buy for the whole of your life. Usually the premiums are higher than a term life policy, but a whole life insurance policy also accumulates a cash value. You can cash in your whole life policy before your death for its cash value, as well as take out loans against the cash value of the policy. Generally, the amount of the monthly premium does not change over the life of the policy nor does the coverage in the event you develop a chronic ailment or terminal disease.
Questions and Concerns About Death Benefits and Collecting on a Life Insurance Policy
If you have had a death in the family, your attention has probably and suddenly been diverted into the many tasks associated with transitioning into this new period in your life. If you have talked to your insurance agent and feel overwhelmed or confused by the information you should contact an insurance attorney who can help you make a claim for the full coverage of your policy. If you are concerned that you are not being covered for what you understood your life insurance policy covered, contact the insurance attorneys at Kiel & Trueax, LLC. When a denied insurance claim is in violation of a policy’s terms or the scope of coverage, we research case law, consult insurance experts, and review recommendations of insurance commissioners regarding issues involved in your case.
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Understanding Life Insurance