The Basics of Life Insurance
Life insurance is important for your family. When you are shopping for your next policy, or your first policy, make sure you know your stuff. Once equipped with some knowledge about the life insurance universe, you can make better financial decisions about your family’s future and save yourself some money to boot. It’s easy, just read on!
You might be asking yourself the following questions:
- Should I be shopping for term life insurance? Whole life? Guaranteed universal life insurance (GUL)? Cash value life insurance? What exactly do I need?
- Do I even need life insurance at all?
- How is life insurance treated for taxes?
- Just how much life insurance is enough?
- How do I know I’m getting the best deal and not overpaying my premiums?
- Should I buy life insurance in my 50’s?
- What if I’m in my 60’s? Do I still need life insurance?
- Do I need a medical exam for life insurance?
- How can I ace my medical exam for life insurance if I need it?
Seems like it can get confusing very quickly and all of the vocabularies can make your head spin. Fear not! We can help you (for FREE) discover all of your options. You do not have to do this by yourself.
Here is a handy guide to this article, feel free to head directly to the section you need.
- 10 Considerations Before Buying Life Insurance
- There Are Four Primary Role Players Within A Life Insurance Policy
- Life Insurance Doesn’t Just Tag A Life With A Dollar Figure
- Life Insurance Is A Guaranteed One-Way Contract
- Life Insurance Is Not A Great Investment
- Life Insurance Has Two Broad Types: Term And Permanent
- How Much Life Insurance Do You Need?
- Which Company Is Best For You?
- Whole Life Insurance Is A Big Money Maker For The Industry
- You Need Expert Independent Advice When Shopping For Life Insurance
Death is universal folks. We all have to experience it at some time or another. Like Jim Morrison from The Doors said before tragically dying himself, “No one here gets out alive.”
Despite the fact that life insurance has universal applicability and everyone could use it, more than half of American households have NOTHING to protect their family upon their death. What gives? Why not?
One reason is there is still a great deal of confusion with regards to shopping for life insurance. Some people are in denial about the reality of their own death, and some people are confused about the subject and what steps to take.
There are also people who are put off by the traditional insurance salesman and would rather visit a proctologist than talk about life insurance with anyone.
For instance, everybody remembers the annoying agent from the movie “Groundhog Day,” Ned Ryerson:
Now more than ever, people like you are turning to the internet for help with securing their family’s financial future. When armed with the right information, you can simplify the process of decision making and you will arrive at the right choice both for you and your family.
10 CONSIDERATIONS BEFORE BUYING LIFE INSURANCE
You need life insurance if anyone relies on you financially.
The first question I’m always asked is “Do I even need life insurance?” The short answer is YES if anyone anywhere depends on your ability to bring home the bacon. It is that simple.
Coverage is obligatory once you say “I-DO” to your true love or if you are a parent with dependent children at home. This is the main driver for term life insurance for millennials.
This is common knowledge and is a responsible thing to do, however, you might also need life insurance if you are an ex-spouse, sibling of a dependent adult, child of a dependent adult, or a partner in a business.
Are you comfortably retired, or financially independent with oodles of money in the bank? Would no one suffer financially if you died tomorrow?
Then maybe you do not need life insurance. Even in these cases, consider the use of life insurance as a strategic financial tool (i.e. for estate tax purposes)
THERE ARE FOUR PRIMARY ROLE PLAYERS WITHIN A LIFE INSURANCE POLICY
And these roles are:
- Insurer – the company who issued the contract, or the ones accountable for paying out a lump sum after death. These companies have been around for hundreds of years, and they are rated based on financial strength.
- Insured – the person, or persons whose lifespan the policy is based on.
- Owner – the person paying the monthly premiums to the life insurance company. This could also be the insured, a relative of the insured, or some other entity that would be in financial trouble if the insured died tomorrow.
- Beneficiary – The person, trust or other entity that will receive the money at the death of the insured. This doesn’t have to be a family member, though it often is.
LIFE INSURANCE DOESN’T JUST TAG A LIFE WITH A DOLLAR FIGURE
Rather, it helps to compensate for the financial consequences which accompany the loss of someone’s life.
Life itself is precious. Your life is invaluable and it is impossible to put a price on it.
Life insurance deals with the loss of your life, and more importantly, what a financial hail storm losing your income would mean to your family. Plain and simple, life insurance helps those who are left behind eliminate monetary burdens.
While you are alive, it provides peace of mind and a good night’s sleep. After you die, life insurance provides so much more.
LIFE INSURANCE IS A GUARANTEED ONE-WAY CONTRACT
A life policy is a unilateral contract in-between an insurance company and the owner of the policy.
In this case, the life insurance company is the one making all of the promises and guarantees. The insured only has to fill out an application truthfully and die. During the application the insured is making assumptions, as in “I assume I will pay these premiums,” and “I assume I will not have any health issues in the future.” The legally enforceable burden of paying the death claim is all on the insurance company’s shoulders.
The insured is under no obligation to hold up their end of the deal-they could quit paying tomorrow or have a stroke the day after. However, the life insurance company is legally responsible for upholding their end of the deal and in fact, it’s guaranteed.
LIFE INSURANCE IS NOT A GREAT INVESTMENT
Many financial gurus do not consider life insurance as an optimal investment. Some whole life insurance policies include an investment feature that offers a degree of tax relief. In most cases though, there are better and more efficient tools for investments.
If you need a different type of insurance-like disability or mortgage protection-visit our trusted partners.
LIFE INSURANCE HAS TWO BROAD TYPES: TERM AND PERMANENT
Term life insurance is the simplest, the most widely applicable and usually the least expensive. In term life insurance, policy premiums are based on the probability wherein the insured might die within a stated term. Twenty years is the most common term, though an infinite number of possibilities are available.
Permanent life insurance comes in many names… “whole life”, “cash value life”, and “guaranteed universal life” among others. It uses the same probability of death but includes a savings mechanism (cash value) designed to help the policy to exist for life. Permanent insurance is usually more expensive, however, once it is structured correctly it could last up to 121 years.
HOW MUCH LIFE INSURANCE DO YOU NEED
Simple question, many answers.
Every life is different, and every family’s different needs for life insurance reflects that diversity. Life insurance shoppers use an “income multiplier” as a way to determine how much life insurance they need, however that’s an outdated way to look at a complex problem.
Using a simple income multiplier–such as 10x or 20x your annual income–might be a good place to start. This doesn’t ring true as you get older and have more savings in your 401k, so if you need life insurance and you are over 50, your income multiplier may be less.
The best course of action is to get free advice from one of our underwriting experts before you sign the dotted line. Why leave this up to chance?
You may be buying too much life insurance or worse:
Not nearly enough.
WHICH COMPANY IS BEST FOR YOU?
The last time we counted was in 2015, there are over 814 life insurance companies in the U.S. Furthermore, each one of those companies have 10 – 20 different programs or policies, and you start to see how big this industry is. There is a lot to choose from. It’s best to work with a professional career agent selling insurance.
So which company or plan is best for you and your family?
The answer to that question is just as unique as you are. Every single company will view different circumstances differently, especially when it comes to your age and health. Some companies are great for smokers, where others are great for diabetics.
One company might be great for life insurance after a heart stent, while another completely different company will be the best for after a mild heart attack.
Here’s a Hint – The best company for you may be a company you have never heard of. Sometimes the best companies for you do not buy Superb Owl ads!
Here’s another Hint – You don’t have to sort through 814 companies and thousands of options alone. Let our underwriting experts help you find the “best” company today.
WHOLE LIFE INSURANCE IS A BIG MONEY MAKER FOR THE INDUSTRY
As you pay premiums into a life insurance policy, the insurance company combines those premiums with millions of other policyholders into massive pools. The life insurance company then pays out claims when the policyholders die.
The difference between the money taken in and the death claims paid out is the insurance company’s profit. This is a simple explanation of the “business of life insurance”, however, there are additional levers to pull with whole life.
Many people stop paying premiums or cancel their high-price policies. The money they paid in, where does it go? It turns into profit for the company.
There are surrender fees that eat into the cash value of the policy, sometimes lasting for ten years or more! That equals more cha-ching for the life insurance company.
On top of all this, whole life insurance premiums are higher than term life insurance premiums, sometimes as much as ten times higher!
Listen – whole life certainly has its place and we are not bashing it for the right cases. Certain clients will only qualify for a guaranteed issue type life insurance policy, and these are usually whole life.
Now that you know the secret, it’s important that you look at the options you have for your policy before you buy it.
Make sure you can actually afford the policy that you buy because these companies have plenty of money already. No need to make a further donation. We don’t need to give them another dime unless we are getting real, tangible benefits from these policies.
YOU NEED EXPERT INDEPENDENT ADVICE WHEN SHOPPING FOR LIFE INSURANCE
There are many online tools to help you decide how much money you must pay for a policy. However, once you get to that certain point, it would be best that you contact a live person who can walk you through the process of application. This is crucial if you have a heart condition. You will pay more for your life insurance than you have to by working with a novice who doesn’t understand heart problems.
Not to toot my own horn here, but we have saved our clients thousands of dollars on life insurance in the past, our services are FREE, and there are no high-pressure sales tactics.
See, insurance companies file rates with each state’s insurance commissioner, and these rates are all the same no matter what channel you buy it through. Whether you buy it from the company itself direct, or from an agent, the rates are the same. The rates will differ slightly among the various companies, but the most important distinction will be your health class.
The difference between one health class and another is huge! Often 50% or more, and that’s where an independent underwriting expert can help you.
A dedicated and knowledgeable underwriting expert will save you money by choosing the best carrier based on your anticipated health class. It’s that simple. Plus it is a free help on one of the most important decisions for your family.
Did I mention there is no cost to you to use our services?
The above information will definitely help you in terms of understanding what life insurance is. The idea here is to make the process of buying life insurance much easier. With the great benefits that life insurance provides, you must consider it! Don’t be one of the millions of families that put this decision off for one reason or another.
Does your family really need to wait any longer for this protection? What does Tuesday look like for your family if you die on Monday?
We make the process simple and easy. Get a free quote today and protect your family with confidence.