There are several life insurance options that are available in the world. I am sure you might have come across an ad or advert about life insurance. The easiest way to start shopping for appropriate life insurance is to first understand the various kinds of policies available in life insurance. We are first going to look at what life insurance is.
Life Insurance Explained
In simple terms, we can describe life insurance as an agreement between a policyholder and an insurer whereby the insurer warrants payment of demise benefits to the beneficiary when the insured dies.
Depending on the type of insurance contracted, the insurance company promises a benefit usually calculated with a free asset ratio.
The main purpose of life insurance is to offer financial protection to the beneficiary when the insured person dies.
Before purchasing life insurance, the applicant needs to analyze their situation and the living standard of the dependent. Some different types of life insurance policies include term life, whole life, variable universal life, and universal life insurance policies.
Through the help of a life insurance broker, you can get to understand the different options available for you in order to make an informed decision.
Deciding Whether You Need Life Insurance
As we have seen, various options are there for you to choose the appropriate life insurance that suits your needs. To help you decide whether you need life insurance we are going to give you an insight into this.
Most people tend to think that life insurance is only for those individuals who have families they support. However, the common question that people have is who should buy life insurance. Let us cover various common situations to help you make your decision on whether you need life insurance or not.
Is life insurance necessary if I don’t have dependents?
In some instances, life insurance is important if you don’t have dependents. This is very beneficial because the payment can be used to cater to your burial expenses. Depending on the type of life insurance you buy, there are many benefits of life insurance cost even if you do not have dependents.
The most vital thing that you should understand about life insurance is that the younger you are, the less expensive it will be because you will have a longer time to pay for your life insurance premiums.
You might also consider having life insurance in order to build wealth, provide for your family, and also protect your assets. You also need to consider the stage you are in life. Whether you have a child, you are in school or you want to start a business, get a new home, or get married.
All these factors will help you settle for the appropriate life insurance for your needs.
Getting life insurance for your parents is also another option because if you pay your premiums, you will be the beneficiary of the policy when your parents are no more.
Ensuring your kids will depend on whether there are things that you predict about their future such as illnesses. Life insurance for kids will also help them to have a life when they reach adulthood. Though life insurance for kids is not so common, however, it is an option in various situations.
Types of Life Insurance to Choose From
As we saw earlier, essentially, there are two kinds of life insurance policies.
Term life insurance policy lasts for a specified time and expires at the end of the policy. On the other hand, whole life insurance is a form of permanent life insurance. There are several other forms of life insurance policies that fall under these two main categories. The only difference is that each plan has its benefits and drawbacks.
In this section, we are going to look at in-depth types of life insurance; you will be able to make a decision and select the one that fully suits your specific needs depending on the situation you are in your life.
Types of Life Insurance
Term Life Insurance
This type of life insurance is set for a certain period or a certain year and then it expires. In case of your demise, before the term is over, a death benefit is paid to the beneficiary you indicated. Most people often consider life insurance to be the simplest form of life insurance. It is also an easily accessible type of life insurance and that is the way it is preferred by many.
If you strictly pay your premiums, you will be paying for death benefits which will be given to your beneficiaries once you die. Depending on the options you choose, the set amount of money can be paid in various ways such as monthly, annually, or lump sum payments.
Term insurance mostly costs about $30 to $40 per month for about 30 years making it an affordable type of life insurance for many.
Permanent Life Insurance
This type of insurance policy is also known as whole life insurance. In simple terms, permanent life insurance does not expire. The policy has a death benefit; also, it has a cash value. This cash value is a tax-deferred savings account which is also a part of the policy.
This cash value attracts interest at a certain fixed rate. As you pay your premiums every month, a predetermined portion of your premiums will be deposited into a cash-value account; this offers a guaranteed return.
Permanent life insurance has additional features and fees which makes it a more costly life insurance policy. In fact, it can cost about 15 more times than term life insurance.
If you pay your premiums on time, the whole life insurance will be active. The only setback is that you need to consider things such as taxes, surrender fees, over stipulations, and interests. This makes whole life insurance more complicated.
If you need cash value to cover your assets, endowments, or even estate plans, you will need whole life insurance which will offer more benefits compared to term life insurance.
Participating Life Insurance
A simple definition is the type of insurance whereby the applicant gets dividend payments from a company providing life insurance policies. The reason why it is called participating life insurance is the policy is entitled to participate or share the excess earnings of the life insurance company.
On the other hand, non-participating life insurance does not have the right to participate or share surplus earnings. This means that the participant will not receive dividends.
Whole life insurance pays dividends and therefore it is considered to be participating in life insurance. On the other hand, term life insurance is not participating because it is a rented policy.
Universal Life Insurance
This is life insurance similar to both term and whole life insurance. The premium you pay will go towards covering death benefits and also providing cash value. For universal life insurance, the policyholder is capable of changing the death and premium benefits amounts without the need to get a new policy.
There is a fixed minimum premium that you need to pay to keep the policy in force; you also have the option to use the cash value you get to pay your premium. The accrued interest can ease the burden of paying the premium for you because it is possible to skip the premiums paid and use the earned cash value.
You need to note that universal life insurance has an interest rate. The interest rate depends on the current trends and market interest rates this means that if the interest rates go down, your premiums will go up to compensate for the reduced cash value.
One reason would be if your current financial situation changes. This is the main selling feature of a universal life insurance policy, however, the same can be done with term life insurance.
What attracts most people to universal life insurance is the flexibility it offers. However, there is complexity when you try to shift premiums because this comes at a cost.
Variable Life Insurance
This life insurance is just like whole life insurance because it features cash value, however, there is a big difference in the functions of cash value.
In permanent life insurance, the cash value is in the form of a savings account. The growth of these savings might seem insignificant or low compared to other investment options, however, there is a guaranteed minimum rate that you will receive. Divided payment is one of these benefits you will receive from your life insurance company.
In variable life insurance, the cash value is similar to investing. The money you pay goes to sub-accounts just like in mutual funds where you can grow your investment. This makes it the best compared to permanent life insurance. It has high tax-deferred growth. It is possible to invest in sub-accounts that are available through the policy you choose. This means that you are not able to choose from various options similar to those available on the open market.
What Is the Cost of Life Insurance per Month?
It is very important to pay for your life insurance policy so that you will be able to take care of anything that happens to you. Paying for Kid’s College, your mortgage, and debt can be a burden.
It is important to ensure that you are a family and will be able to deal with any issues that may arise.
The cost of life insurance is something that most people are concerned about. In this section, we are going to look at the average cost of life insurance. We are also going to look at the factors that determine the cost of life insurance.
To most people finding light insurance coverage is a difficult process. There are countless insurance companies available making it difficult for people to make the decision on which to settle.
Factors That Determine the Cost of a Life Insurance
Age
This is the first factor that determines the cost of life insurance because the younger the applicant, the lower the cost. Older participants tend to pay higher premiums on life insurance.
The average life insurance rate changes significantly by age.
Health
The general health of an applicant, as well as the health history of your family, plays an important role in your monthly insurance premium costs. If you have a chronic illness in your family, it will make the cost of your health insurance go up.
Gender
There is also another important factor that determines the cost of life insurance. Women have a longer life expectancy compared to men and therefore the life insurance for women is lower than that of men.
Place of Residence
The place you live in determines the cost of your life insurance premium. Different states have different lights for life insurance premiums.
Occupation
What you do to earn a living will also determine the cost of your life insurance. If you work in an office, you pay lower premiums compared to someone who does a high-risk job.
The Type of Life Insurance
The type of life insurance you choose will affect the amount of money you are going to pay for the coverage. As we have seen above there are many types of life insurance. Whole life insurance will attract higher monthly premiums compared to term life insurance policy. The term length will also determine the cost of your life insurance it can be 10, 20, or 30 years.
Whole Life Insurance vs Term Life Insurance
Are you concerned about the benefits of whole life insurance or term life insurance? We are going to look at the benefit of both to help you in making the decision.
According to most people’s terms, life insurance is the most preferred. It is also appropriate for life insurance for certain terms and conditions. It also offers flexibility because it is available for a certain amount of time starting from 10 20, and 30 years.
However, unlike whole life insurance cover term life insurance does not allow you to generate cash value from the policy.
Whole life insurance and term life insurance are two common types of life insurance policies, each with its own characteristics and considerations. Here’s an overview of the key differences between whole life insurance and term life insurance:
1. Duration of Coverage:
Whole Life Insurance: This type of insurance provides coverage for the entire lifetime of the policyholder, as long as the premiums are paid.
Term Life Insurance: Term life insurance offers coverage for a specific term or period, such as 10, 20, or 30 years. If the policyholder dies during the term, the death benefit is paid out to the beneficiaries.
2. Premiums:
Whole Life Insurance: Premiums for whole life insurance are generally higher compared to term life insurance. However, a portion of the premium goes into a cash value account, which grows over time and can be accessed by the policyholder.
Term Life Insurance: Term life insurance typically has lower premiums, making it more affordable, especially for individuals who need coverage for a specific period.
3. Cash Value:
Whole Life Insurance: One distinguishing feature is the cash value component. Part of the premium paid goes into a cash account that accumulates over the life of the policy. Policyholders can borrow against or withdraw from this cash value.
Term Life Insurance: Term policies do not accumulate cash value. If the policyholder outlives the term, there is no payout or return of premiums paid.
4. Investment Component:
Whole Life Insurance: It is considered a form of permanent life insurance and includes an investment component. The insurance company manages the investments within the policy, and policyholders may receive dividends.
Term Life Insurance: There is no investment or savings component in term life insurance.
5. Cost Considerations:
Whole Life Insurance: Generally more expensive due to the lifetime coverage and cash value component.
Term Life Insurance: Typically more affordable, making it a popular choice for those looking for coverage during specific life stages.
6. Suitability:
Whole Life Insurance: Suited for those looking for lifelong coverage and are willing to pay higher premiums for a policy with a cash value component.
Term Life Insurance: Often chosen by individuals with temporary insurance needs, such as covering a mortgage or providing for dependents until they become financially independent.
Term life insurance is very affordable because the companies do not have the obligation to manage anything for you. Term life insurance is appropriate when you are faced with difficulties managing expenses such as kids and mortgages.
This policy can help you accumulate huge amounts of money for your loved ones within the period set.
Most applicants worry about paying excess in various life insurance plans. However, life insurance ranges from $500 to about $1500 every year.
This means that the average cost is allowed to be $40 to $150 monthly depending on the type of insurance you choose.
In general, permanent life insurance is costlier than term life insurance. The reason behind this is that whole life insurance has some cash value that builds up.
Ultimately, the choice between whole life insurance and term life insurance depends on individual financial goals, budget considerations, and the specific insurance needs of the policyholder.
We can, therefore, conclude that for term life insurance you can be able to predict the amount you are going to pay for your premiums for the whole life insurance, you first need to understand your needs and look for the various options available in the market.
Where to Get Life Insurance Cover?
Now that you understand the different types of life insurance available for you and the average cost it is now a good time to look at the various companies that can offer life insurance services.
Globe Life Insurance
Started in the year 1951 Group Life Insurance Company has been in the village to provide the best life insurance services in the USA.
The company has been in the service for the past 60 years making it among the largest and most reputable life insurance companies in the United States.
Currently, Globe Life Insurance Company has over 80 billion dollars in insurance force. The company provides a lifetime of superior services to its policyholders.
In addition to the years, the company has received high-ranking for its management skills, integrity, and financial strength.
Sun Life Insurance
This is one of the most prominent and largest insurance companies in the world. The company features an operation that dates back to 1865.
We offer a wide variety of life insurance covers to suit most people’s needs. This is achievable through their innovative ways to build healthier and sustainable communities for life.
The best thing about the Sun Life insurance company is that they offer dozens of products and tools to help people get the best life insurance to meet their specific needs. They are mainly in the United States, but you can get those services almost everywhere in North America.
The Importance of Life Insurance
The main reason why you need life insurance is to ensure that you do not reuse a burden on your loved ones in case of your demise.
During this difficult time, your family can make a life insurance claim in order to cover your burial expenses as well as other life needs.
Life insurance brings about peace of mind to your family as well as yourself knowing that the welfare of your loved ones is taken care of in case something happens to you or your spouse.
It is therefore advisable to look for an insurance cover that’s which one is as soon as possible instead of waiting for too long.
