Blog  Contact  FAQ  Tell a Friend

HOME

CREDIT CARDS

LONG DISTANCE

INTERNET

LOANS

CELL PHONES

INSURANCE

BANKING

KNOWLEDGE

:: HOME :: CREDIT CARDS :: LONG DISTANCE :: INTERNET SERVICE :: LOANS :: CELL PHONES :: INSURANCE · Main Page · Auto Insurance Compare Quotes Search by State Tips and Advice · Health Insurance Compare Quotes Tips and Advice · Life Insurance Compare Quotes Tips and Advice Life Ins. Calculator · Home Insurance Compare Quotes Tips and Advice · Business Insurance Compare Quotes Tips and Advice · Other Insurance · Info & Resources :: ONLINE BANKING :: KNOWLEDGE :: MORE

Life Insurance Tips and Advice - Life Insurance Explained Bookmark this page Life Insurance Tips and Advice Center Topic: Life Insurance Explained What is life insurance? See the subtopics menu for a detailed explanation of life insurance. For additional information about life insurance, see the topic list directly below. Life Insurance Topics · Life Insurance Explained · How to Choose Life Insurance · Life Insurance Terminology Life Insurance Explained - Subtopics · About Life Insurance · Basic Life Insurance · Having Enough Coverage · Choosing the Right Coverage · Who Benefits from Life Insurance? · Finding Life Insurance Providers · Record Keeping for Life Insurance About Life Insurance What is life insurance? Life insurance provides individuals with the security of knowing that dependents and others will receive benefits upon the insured's death. Benefits come in the form of financial compensation — primarily to help replace income and pay for funeral expenses. Different life events, such as marriage, divorce, or the arrival of children, will trigger different needs for life insurance protection. There are two primary types of life insurance coverage options: term life insurance and whole, or permanent, life insurance. Term insurance pays death benefits only if the insured dies during the term of the policy and it simply expires at the end of the term, although it can be renewed. Whole, or permanent, life insurance pays death benefits whenever the insured dies, and does not expire. Death benefits are the money paid out by the insurance company to the insured's beneficiaries, dependents, or estate. Beneficiaries are individuals or entities the insured specifically names to receive the death benefits from the insurance policy. Life insurance can be purchased as individual policies, through an agent or directly through the insurance company; or as a group policy, through an employer, trade association, or other group like an alumni association. Some types of life insurance, or coverage options, require a medical exam and proof of insurability in order to provide coverage. ^ Back to top Basic Life Insurance Coverage What are the basic types of life insurance? There are two primary types of life insurance: term life insurance and whole, or permanent, life insurance. Term life insurance pays death benefits only if the insured dies during the term of the policy. If the insured is still alive at the end of the term, coverage expires, although it can be renewed. This is the best coverage for someone who needs insurance for a set period of time, such as purchasing a 20-year policy to ensure that dependents would be able to afford to go to college or to make sure a debt would be paid off if the insured died. This type of insurance is convertible into a permanent policy, but does not built equity. Permanent, or whole, life insurance pays death benefits whenever the insured dies. This is the best coverage for someone who wants to have a savings, as this type of insurance builds equity. Premiums for permanent insurance are higher than for term policies, but remain the same throughout the life of the insurance, while term insurance premiums can increase every time the policy is renewed. There are three types of whole life insurance: traditional, universal, and variable universal. Traditional whole, or ordinary, life is insurance is the most common type of permanent insurance — it provides death benefits and premiums that remain the same throughout the life of the policy. Universal, or adjustable, life insurance provides the opportunity to increase death benefits, and even altering the premiums, using the cash value of the savings in the account. Variable life insurance provides a combination of death benefits and a savings account, for which the insured can plan the investments, into stocks and bonds, and is considered a risky form of life insurance. ^ Back to top Having Enough Life Insurance Coverage When should existing life insurance coverage be reviewed? Life insurance protection is an important part of a sound financial plan. Life insurance is designed to pay death benefits, in the form of cash, to the beneficiaries, dependents, or the estate of an individual. Individuals are advised to review the coverage periodically, to ensure that it properly addresses the insured's financial situation and insurance needs, and will provide the proper amount of benefits to those left behind. A good time to review a life insurance policy is once each year, perhaps when it is time to renew other insurance policies or at tax time. At that time, individuals should assess any life changes that have occurred, such a marriage, divorce, or birth of children, to understand how the coverage may need to be updated. Also, if a major employment change has happened, a raise, for example, this may affect the amount of coverage an individual wishes to have. As one ages, and especially as an individual approaches retirement age, the needs for life insurance change. This can be because social security benefits have kicked in or because of the death of a spouse or partner. At each yearly review, it is a good idea to talk with the life insurance agent or company who sold the original insurance coverage, and ask how some of these changes could affect coverage, or to purchase more coverage if necessary. As long as a consumer has a valid insurance policy, it is rare that a medical exam or proof of insurability would be required to upgrade or change coverage. ^ Back to top Choosing the Right Life Insurance Coverage What are the types of life insurance to consider purchasing? Choosing the right life insurance coverage requires an understanding of the financial and life position of the insured, what options are most important, and what insurance companies offer the best policies. Individuals purchase life insurance for one of two reasons—to provide death benefits to beneficiaries or dependents upon the insured's death, or as an investment, a type of savings account. To provide death benefit coverage, individuals can purchase one of two kinds of life insurance: term life insurance or whole, or permanent, insurance. Term life insurance pays death benefits only if the insured dies during the term of the policy. This can be when the insured reaches a particular age, 65 years is a common end of term, or for a set number of years, not usually more than thirty. If the insured is still alive at the end of the term, coverage expires, although it can be renewed. This type of insurance is convertible into a permanent policy, but does not built equity so cannot be used as a savings vehicle. This is the type of insurance most often available through group policies. Whole, or permanent, life insurance pays death benefits whenever the insured dies — whether it is one day, one year, or one hundred years from the date purchased. This is also the best coverage for someone who wants to have a savings, as this type of insurance policy builds equity. Premiums for permanent insurance are higher than for term policies, but remain the same throughout the life of the insurance, while term insurance premiums can increase every time the policy is renewed. ^ Back to top Who Benefits from Life Insurance? Who benefits from life insurance? Although whole, or permanent, life insurance policies can be used as investments for savings, life insurance is designed to benefit the dependents, family, beneficiaries, or estate of an individual. The insured is the one person who will not benefit from any of this insurance coverage. Beneficiaries are persons or entities such as a trust, charity, or estate, that an insured designates to receive the death benefits, i.e. the money from the insurance policy. If an insured person does not identify any beneficiaries, the benefit is paid to the insured's estate, which is usually dependents or other family. Individuals name primary beneficiaries — the individuals or entities who receive the death benefit if they can be located after the insured's death. Insurance companies also request that an individual name contingent beneficiaries, as well. These individuals or entities receive the death benefits only if the primary beneficiary cannot be found. If neither type of beneficiary can be found, the benefits will be paid to the insured's estate. Instructions for beneficiaries are also helpful. For example, if two primary beneficiaries are named, but one of them has died, what will happen to that beneficiary's share? Will the other primary beneficiary receive it all, or will a dependent of the deceased beneficiary get that share? Naming beneficiaries, and keeping the information up to date, is an important task. Beneficiaries should be identified as clearly as possible, with their relationship to the insured, their social security numbers, addresses, and any other information that will help the insurance company find them, and confirm their identity, upon the insured's death. ^ Back to top Finding Life Insurance Providers What is the best way to find life insurance providers? The best way to find a life insurance provider is to work with someone that a friend or family member uses. Another way is to search for life insurance online and compare insurance providers side by side. No matter how an insurance professional or insurance company is recommended, it is important to compare life insurance providers. This means asking a lot of questions about the policy, the types of coverage available, the insurance professional, and what type of support is offered. Is a term policy best and how long should the term be? Is a permanent policy a better choice? If the policy is for investment, rather than for dependents, is it sufficient to meet the insured's needs? What type of additional coverage is necessary? Is a group or individual policy the best option? What are the premiums and will they ever increase? Is the life insurance agent a captive or independent agent? Does the insurance professional have experience selling life insurance? Is the insurance professional licensed? What type of customer service does the insurance professional offer? ^ Back to top Record Keeping for Life Insurance Policies What records are necessary for life insurance? Keeping complete records about a life insurance policy is an important step in purchasing life insurance. Someone other than the insured will be reviewing the records in order to file a claim, so it's helpful if they are easy to find and as complete as possible. For each life insurance policy make sure to record: The name of the issuing company and its headquarters office information The name and contact information of the agent who sold the policy The policy number and the type of policy, term or whole The date the policy was issued The amount of the death benefit The location of the original copy of the insurance policy If the policy was purchased as part of a group policy, make sure to also include the name of the employer or group sponsor and its contact information, and the certificate number. For any other programs that have a death benefit—such as travel insurance, credit card, or annuities—make sure to record the same type of information. Update this information when any changes are made. No matter how the information is recorded, make sure to keep copies where survivors will look for them—with other important papers or in a file cabinet, for example. It is also important that the information be stored in at least two places, one of them outside the home—at a friend's house, in a safe deposit box, or, for computerized records, backed-up off-site somehow. ^ Back to top Life Insurance Calculator How much life insurance do you need? Simply enter your current assets, expenses, income to get started. You can also adjust the inflation rate and your expected rate of return. Estimate how much life insurance you need quickly and easily. · Calculate how much life insurance you need Note: This information is for general use only. Use this information as part of a full research process. General advice does not always apply directly to individual matters. Please consult a local expert with specific and complex questions about your individual situation. Recommend this page to a friend  ^ Back to top

Home | Banking | Cell Phones | Credit Cards | Insurance | Internet Access | Loans | Long Distance | More About | Articles | Blog | Bookmark | Contact | FAQ | Glossary | Knowledge | Search | Site map | Tell a friend