Posts Tagged: Term Insurance

Have you ever heard the term load and no load in the financial service industry? The loading of an insurance product usually always involves the agents commission and the companys expenses. Some policies have what they call front end loads and back end loads. These loads are normally associated with permanent insurance policies. The cost of doing business is all wrapped up in the loading of a policy. No load term life insurance is probably the least expensive form of life insurance in the market. You often wonder what makes one company so much cheaper than the other and it usually has to do with the type of goods and services provided. Those goods and services are what make up the loading aspect of the life insurance policy. The no load term life insurance policy usually indicates that you are primarily purchasing direct from the insurance company and with little or no professional advice or opinion.

The life insurance professional is still very important to a great number of people. Buying life insurance direct from a company without an agent may be less expensive but it also may leave you wanting when it comes to professional counseling and service. Term life insurance is very simple and so the purchase of term life insurance may be something that you can handle on your own without a professional. These are individual choices and preferences that each of us must decide upon before we buy life insurance.

Term life insurance is inexpensive to begin with and so researching the market place for a no load product may or may not have a major affect on the premium. Ask about loading when you shop for term life insurance. You may be surprised at what you learn about the insurance companies and how they come up with their rates. It will also help you when you inevitably begin to shop for permanent life insurance.

Most individuals have some form of insurance, whether it is for their vehicle, home or health. But it is important, however, not to overlook the benefits of life insurance, which pays money to beneficiaries when the insured dies.

HOW LIFE INSURANCE WORKS

Typically, the insured person makes payments into the plan – called premiums – in exchange for a “death benefit,” the money that is paid at the time of death. If you are considering purchasing life insurance there are a few potential problems you need to be aware of.

DIFFERENT TYPES OF LIFE INSURANCE POLICIES

There are numerous types of policies you can choose, but life insurance policies generally fall into three categories – protection, long-term savings and estate conservation.

Many people purchase life insurance for the purpose of providing for their dependents in the event of their death, thus protecting your existing stream of income. If you are in the protection category you may want to consider term life insurance, which offers only a death benefit for a specified period of time such as until you retire.

If long term savings is your reason for purchasing insurance, you may consider a cash value policy. With this type of life insurance, your beneficiaries receive a payment upon your death based on the full amount of coverage , not the cash value of the plan. The value of these plans is usually tied to an underlying investment portfolio and that is how funds accumulate.

Another added benefit is that these policies usually allow a holder to borrow from the accumulated funds in the plan without taxes or penalties. Depending on the policy, you can typically withdraw a portion of cash value and not pay it back, or even cancel the policy and receive the money that has been accumulated over the years.

USE LIFE INSURANCE FOR ESTATE PLANNING

Life insurance can also be used as an estate planning tool, especially if your goal is to preserve wealth for future generations. This type of policy covers one or two lives; the cash generated by these plans typically helps your heirs pay estate taxes and provide otherwise.

Now you have to decide how much coverage you need to provide the amount of income your family will need in the event of your death. After all, your goal in purchasing life insurance most likely is to ensure that income continues for those who are now dependent upon your income.

WHO NEEDS LIFE INSURANCE?

It also is important not to ignore the need for life insurance protection in a single or dual income family. The death of either spouse could create a financial strain on your family.

Life insurance guarantees payment of a given amount to the insured persons beneficiaries when the policy owner dies. While many people, especially younger people, dont necessarily want to take the time to think about something as abstract as dying, this form of insurance is particularly important for parents or other persons with dependents.

The basic structure of most life insurance policies is relatively straight-forward: the policy owner pays a premium every month; upon the owners death, the insurer issues payment for the policy amount to the spouse, children, or other beneficiary(-ies) named in the policy. In practice, as with most forms of insurance, specific policies can be much more complicated than this fairly simple model.

For example, the life insurance policy might have riders, or additional clauses, that pay off in the event of a terminal or critical illness or a permanent disability due to physical or mental causes. Also, there are different varieties of policies, including term life insurance, whole life coverage, universal coverage, and limited-pay policies. Understanding the difference between the different types of coverage and picking the appropriate one for your situation can be difficult, and professional advice may be necessary to ensure the correct policy is in place.

Term Life Insurance covers the insured for a certain number of years, after which the coverage typically expires. Because the policy does not build any cash value, and because it is typically based on a low likelihood of death for the covered person, term insurance premiums are usually relatively low. However, the length of the term, the amount of coverage (and whether it stays constant or decreases over time), and the premium amount (again, fixed or adjustable over time), will all affect the premium amount. The lower premium is a primary advantage of term life insurance; a drawback is that, at the end of the term, the still-living insured receives no benefit from the coverage.

Whole Life Insurance is permanent life insurance, which means the policy holder can withdraw money paid in or borrow against the cash value. Whole life has the advantage of a fixed annual premium and guaranteed death benefits. Premiums are much higher than term life policies at first, but over the life of the policy the two policy types roughly even out in terms of total cost. While whole life insurance does build value over time, it may not be as strong as other savings options in terms of the rate of returns. Also, dividends are not guaranteed with whole life.

Universal life insurance is similar to whole life, but it offers more flexibility in premiums and may offer stronger returns over time. It also has a cash account and accrues interest.

The variety of policies available is intimidating enough to many people. With dozens of optional riders available, and variations even within individual rider classes, competent professional help is definitely recommended when selecting life insurance. It should be noted that the life insurance policies offered by many employers, while an attractive benefit, are typically not adequate to meet the needs of the insureds family in the event of an untimely death. The total amount of life insurance carried should be enough to pay off any mortgages, car payments, credit card debt, and any other major outstanding debt, leaving the survivors in a solid financial situation.

When it comes to buying life insurance the most important comparison is between term insurance and whole life. Here is an explanation of each.

A term life insurance plan provides life insurance – plain and simple. A whole life insurance plan provides life insurance but also accrues value, which you can cash out or borrow against. It generally takes about three years to see any value and then it’s not a lot of money. Term life insurance, in comparison to whole life, is considerably less costly for this reason. Some will refer to term life insurance as renting insurance rather than buying it. The reason for that attitude is that, much like auto insurance, you pay the premium each month or quarter or year to hedge against the bet that you might have an accident (in the case of term life insurance the accident is death). If you don’t have that accident, in the case of auto insurance, or if you don’t die in the case of life insurance, you don’t get the money.

We all die, of course, so it might seem that term life insurance is a good bet and the best bet in comparison to whole life. You would, you surmise, always get your money back. The catch here is that term life insurance will end at a certain point – and that point may well be before you are deceased. Term life insurance plans are only good until a certain predetermined age – many are 70 years of age, others up to 80. For those of us who really need this coverage until the day we die these aren’t good plans in comparison to whole life which will be in force until the day we die.

Term life insurance is a good buy in comparison to whole life, however, if all you are trying to do is set money aside to prevent your young family from becoming destitute in the event of your unexpected death. Once you reach the age of 70, the likelihood is that your children will be comfortably on their own and not dependent on your money or income to survive. Of course, if this is your only life insurance and it goes away before you die then your family or someone else must bear the cost of burying you. That is where whole life insurance is a favorable comparison to term life. Whole life will stay in place as long as you do, and will be there when it comes time to pay for your burial.

It may be, then, that in doing a comparison between term life insurance and whole life insurance, the results indicate a need for both. Many professionals suggest that you buy an amount of term life insurance that would keep your family bills paid for a predetermined time in the event of your untimely death, choosing a term that covers them only until they are old enough to take care of their bills on their own. These same professionals suggest as well that you also buy a whole life insurance policy for an amount of 7000-12,000, merely to assure that your family will have money to bury you.

In other words, if you are 40 and your children are 6, 8 and 10, you’re going to need about 15 years of term life insurance – until your youngest is through four years of college. You might decide, with three children and a spouse that you’ll need several hundred thousand pounds of coverage. A Whole life policy of 10,000, however, would be plenty to provide a decent funeral and burial.

In general, may people understand that having life insurance in any form is a necessity. The policy of life insurance is an excellent method of providing protection for your family members in the event of your death. While many people understand that is important to have life insurance they may not understand that there are many different types of policies available in the world today.

One type of life insurance policy is called Whole Life Insurance, this type of life insurance is effective provided you continue to make the monthly payments upon the premium. This is a very popular type of life insurance because it allows you to build a cash value on the policy and is on a basis that is tax-deferred. The way this works is that a portion of the premium you are paying is put into an account of savings that the policy invests into. All interest that is earned upon the policy is put into the savings and helps to build the cash value. Once the cash value reaches a higher level, you could be required to pay the premium after age or you could be allowed to borrow against that cash value.

Another attractive benefit of having a whole life insurance policy is that your premium will always remain the same. At no time will the amount change at all, therefore as long as you continue to pay the premium each month, you will remain at the same amount for the entire time. If you choose to take a loan out on the cash value you have earned, the only difference you will have to pay is paying back that loan. One downside to this policy is the fact that you will have no control whatsoever over how the company chooses to invest the pounds you pay on your premium.

Another type of life insurance is the term life insurance policy. This policy is selected for a specified amount of time. If you should happen to pass away during the term of this specified time, then your family would then receive payment in the form of a lump sum as the contract specifies. Typically, the premiums upon this type of policy is far cheaper than other types and it does not allow you to build any type of cash value. With this type of life insurance, your premium can change or increase on a yearly basis and it generally does increase each year. It is the more expensive type of insurance that is available however it will provided your family with complete protection in the event of your death.

Term insurance provides coverage for a pre-specified period. For example, term insurance is designed to protect a mortgage or provide income for your family in case of your death. You pay the term insurance premium each month and as long as you pay the premium your policy will stay in force. Once the contract reaches maturity (usually in 10 years) you need to renew your policy at a higher price. If you die while you’re paying the premium your estate gets a large sum of money.

In contrast, permanent or whole life insurance remains in force until you die. You pay the premium on a monthly basis for a pre-specified term, which can range between 10 to 20 years. A portion of your monthly payment pays the insurance and the life insurance company that provided the insurance invests the remainder. Eventually you don’t pay any premiums but your estate still receives a large payment upon death.

Whole life polices have been criticized because their investment returns are low. Thus you were often advised to buy life insurance protection with a term policy and invest the difference between term and whole life payments in a separate investment vehicle, such as mutual funds, stocks, or bonds. Once you have built up a large pool of assets you don’t need the insurance because the assets will provide security and stability in the event of an unexpected death.

However, there is a new, more flexible product called universal life insurance. While the life insurance company controls the savings in a whole life policy, the savings in a universal life plan are owned and controlled by the policyholder. Insurance companies offer a large variety of investment options for this savings component, including mutual funds. Thus, you have the ability to meet your life insurance needs and increase your return on investment.

The major advantage of a universal life policy is tax-advantaged growth. When you pay the policy premium, a portion of the premium pays for the insurance and a portion is invested. However, when you are ready to withdraw the money from your investment, your cost basis ( the portion not subject to tax) is higher with a universal life policy. The cost base for a universal policy is equal to the sum of all your premiums – the amount of money you have invested plus the money you have used to buy life insurance. This is very useful because increasing your cost base will ensure you pay less tax once you sell your investments within the universal life policy.

Universal life insurance provides a powerful combination of life insurance and tax-advantaged investment opportunities. Investors should realize that universal life insurance premiums work twice as hard as other premiums. They should also know that choosing the right product is an important element in the overall success of this strategy. Finally, the benefits of this strategy are magnified if you are in a higher tax bracket.

Life insurance – Tackling the top reasons why we put off buying it

OK, thinking about your own mortality is not a topic anyone enjoys, but our own death is one of the few certainties in life. So why do 35% of Canadians not insure their own life to make sure their family or loved ones are financially protected? While the number of reasons likely match the number of people not insured, the following are the most commonly heard.

Reason #1 I dont have a need for life insurance:
Lets be honest, this reason is by far the most common and for most people untrue. Unless you are an individual who does not have children, has money on hand to cover all debts and funeral expenses, and does not feel the need to offset the loss of their income to a spouse, leave any additional money to family, or to a charity, then it may be true, you dont need life insurance. But few people have the funds readily available to fulfill all their wishes or meet their obligations after their death.

At the very minimum, if you have anyone who relies on your income for their day-to-day needs like a spouse or children, or if you have debts like a mortgage, then you likely need life insurance.

Reason #2 Life insurance is too expensive:
If in the past people have found life insurance to be too expensive it could be because of the type of coverage they were seeking, like whole or universal life insurance. Term life insurance is the most affordable of all the products and is very popular because of it.

Term 10 Life insurance, the most popular Term product in Canada, offers a premium guaranteed not to change for 10 years.

A male non-smoker seeking 100,000 in coverage could be paying as little as*:

1125 for a 30 year-old
2129 for a 35 year-old
3157 for a 40 year-old
4207 for a 45 year-old
5281 for a 50 year-old

A female non-smoker seeking 100,000 in coverage could be paying as little as*:

6106 for a 30 year-old
7112 for a 35 year-old
8133 for a 40 year-old
9163 for a 45 year-old
10219 for a 50 year-old

As you can see, for very little money a year, you can get 100,000 in life insurance coverage.

* Lowest quote online from October 2005 for a Term 10 policy, one of the most popular life insurance products in Canada. Premiums shown are the rates if paid annually.

Reason #3 I dont know anything about life insurance and dont know where to start:
A number of free online tools have been developed to help you decide which term life insurance product is best for your specific situation and how much life insurance coverage you should get.

1Term Life Insurance Analyzers. By answering a few simple questions, these tools will assess your needs and let you know what product is most commonly recommended for people with similar lifestyles.

2Term Life Insurance Calculators. These tools will help you put a pound value on the amount of coverage you need in order to ensure that your family, loved ones and your debts are covered in the event of your death.

Reason #4 Life insurance is a hassle to get:
Thanks to the Internet, getting term life insurance quotes is now fast and easy. If you want to shop around first, getting quotes online means you can avoid hard-sell tactics by someone sitting across from you. There is no sales pressure or obligation to buy when you get quotes online. Its easy, can be done any time at your convenience and is simply a better way to shop for life insurance because of it.

If something were to happen to you, you would want to know that your family is taken care of. With todays economy as it is, more and more people have been trying to cut corners to help save on their budgets. A penny saved is a penny earned as they say. This goes towards saving money and trying to find low cost life insurance coverage that will take care of your familys needs.
Life insurance is pretty simple these days. If you are protected and you were to pass away, your beneficiaries will be left with a cash benefit. These benefits can be used towards anything that they need to use them for. They maybe used to replace lost income, medical expenses as well as funeral expenses. There is no certain set terms that these benefits must be used for.
Life insurance cash benefits are paid out by your terms in your written Life Insurance Policy and can protect a lot of things. If your spouse is dependant on your income for retirement, it can also help to keep those plans in tact. If you have a mortgage, it can help to pay off that debit so that your family will not loose their home. Perhaps you would like for your children to go to college, or you would like to leave money behind for them. With any decisions you make, you can do exactly what you have planned ahead for.
One great thing about Life Insurance benefits is that it is usually paid out tax-free. So when you look at the amount of coverage that you want to buy, what you actually see is what you will actually get. Its nice to know before hand that there is no guess work about how much will be taken out of your spouses or loved ones death benefits.
As you can now see, Life Insurance is very flexible. It makes a lot of sense for people now days, even if they have different goals in mind.
There are two types of Life Insurances. One is Term Life Insurance and the other is called Permanent Life Insurance. Lets first explore Term Life Insurance.
Term Life Insurance is a Life Insurance that last during a certain term. These terms can be from 10, 15, 20, 25 or even 30 years. During this time, your premiums are guaranteed not to increase. If you were to pass away during this time period, then your beneficiaries get the cash death settlement benefits. If you were to live longer than the given term period, you then have the option to continue your coverage for an annual, renewable premium, which is generally much higher. You can usually convert a term Life Insurance policy to a permanent one with out getting a medical exam.
There are two big ways that Permanent Life Insurance differs. First off, the policy is meant to last the rest of your life and as long as you continue to make the required premium payments. Secondly, part of the money that you pay in with is set-aside in an account where it can grow to cash maturity. These funds can be tapped into later on during your life. There are also several different types of Permanent Life Insurances, each with different advantages as well.
Be sure to find a Life Insurance Company and Agent that best suit your familys needs. Take the time to get at least three different estimates before selecting your company. These estimates are free and most agents are more than happy to even come to your home.

Do you need affordable term life insurance? This seems to be the million-pound question. When you want to purchase life insurance you often do not know how much you need or if there is such a thing as having too much life insurance. What constitutes affordable life insurance and how much you need is totally dependant upon your own situation.

Don’t be fooled into determining the amount of insurance you should have to what your best friend or neighbour has. Remember, every situation is unique and your needs will be unique. Your need will be determined by what you wish to see happen in the event of your death. You do have to look at the life insurance cost of the premiums and decide how much you can afford from your monthly budget. There is affordable life insurance available at very low premiums and that will help your family out in the event of your death.

When considering what affordable life insurance is needed in a family situation, you need to do a life insurance comparison. This will help you get the most affordable rates and there are countless life insurance companies able to help you in this regard.

In order to determine how much life insurance you should have, a number of factors need to be considered. For a person with family needs, these may include such things as:
Do you have dependants? If so, how long will they be dependant upon you?
Do you have children? If so, how old are they?
Do you want to insure your children have a post secondary education?
Will your household income be greatly reduced upon your death? If so, how much income do you need to replace so your family maintains their standard of living?
How long will you need to replace your household income?
What taxes may be incurred upon your death?
Do you need to cover debt obligations such as loans or a mortgage?

When you try to determine whether or not you can afford life insurance, think about whether or not your family can afford to be without affordable life insurance.

You can find affordable term life insurance, but you need to establish exactly what you need first.

Is Buying Term Life Insurance Online The Same As Buying It From An Agent?

When you purchase term life insurance online, it is exactly the same as if you went into an office and sat down with an agent. In fact many of the online life insurance companies will give you a free quote online, but you have to speak to an agent to make the purchase. This way you are getting the benefit of shopping for term life insurance online, but still get to discuss the policy in person with an agent.

By searching online for the lowest life insurance rates, you can choose the company from whom you want to buy the policy. There are so many companies online that you do have to be careful of which one you choose. When you find low term life insurance online, you should check the life insurance ratings for the company before you commit to anything.

Just shopping for term life insurance online lets you request as many free quotes as you wish. You are not under any obligation to buy the life insurance online, but if you dont want an agent calling you about the policy, you should indicate this on the application form. This lets you shop in the comfort of your home and search for the lowest life insurance rates that fit your needs and your budget.

It may take you some time to get the term life insurance online that you need. Since there are so many life insurance companies with an online presence, you can visit all of the websites and compare the rates. You will also find several sites that do the comparison for you taking all the guesswork out of finding the lowest life insurance rates. With this type of service, you only have to enter your information once to get several responses on low rates for your term life insurance.

It doesnt matter what the weather is outside or if you dont feel like getting dressed. Searching online in the comfort of your own home takes all the stress out of getting term life insurance. Online life insurance companies are open 24 hours a day, so you dont have to make plans to look for the lowest life insurance rates during business hours.

What do you get with term life insurance online?