Life insurance

Life insurance

Basic information about life insurance

People buy insurance life to ensure that beneficiaries have enough money to maintain their lifestyle after the insured dies. The beneficiaries are persons who you designate so that they receive the money from the life insurance policy when you die. This money is known as benefit for death.

You can designate one or more beneficiaries. If you designate more than one, you have to decide how to divide the money. You can also select a secondary beneficiary or contingent beneficiary, so that you receive the money if the primary beneficiary dies before you. Life insurance is not an investment. An investment is a financial risk, since you could win money, but also could lose part or all of your money. In contrast, the life insurance pays a guaranteed death benefit.

Some types of life insurance, as the ordinary life, universal life and variable life, can accumulate a cash value, which you could use as income for retirement. Agents and companies may not see life insurance as an investment or as a source of income for retirement. If an agent or a company trying to sell you a policy of life insurance as a good investment, be careful. Also, do not confuse the life annuities with insurance. Often people buy annuities for retirement because they can provide a fixed income over a long period.

Insurance companies use a process called assurance to decide if they will sell life insurance to someone and what prices to charge for insurance premiums. The company will consider several factors to determine how much to charge for the insurance premium. These include:

• your age
• sex
• medical condition
• If you smoke
• His hobbies and occupation.

Seeking young people and people who have good health, not smoking and they have no hobbies or hazardous occupations, lower premiums, will be charged for them since the company expects that these policyholders live longer. Applicants who are older, who have health problems, smoke or have hobbies or hazardous occupations will probably pay more.

Companies may charge you a higher premium or may decide not to sell you a policy because of its potential risk. If a company does not sell you a policy, follow looking. Assurance guides vary from company to company. It is possible to find coverage with another company.

Who need life insurance?

If nobody depends economically on you, you may not need life insurance. If you have people or family members who depend on you, you may want to have enough insurance to make her family pay their debts and to provide some income. Consider your circumstances and the type of quality of life that you want to have your dependents when you decide to buy or not life insurance and how much to buy.

To help you decide if life insurance is right for you, ask the following questions:

• Do you need to replace your income in order to maintain your spouse, children or other family members?
• Do you have debts, such as mortgages, credit cards, student loans or other debts?
• Do you want to help their children pay for College?
• Will your survivors need money to pay his funeral expenses or the cost of allocation of your assets?
• Do you have a large amount of goods that may be subject to State or federal taxes?

If you answered Yes to any of these questions, consider buying life insurance.

How to buy life insurance for you or for someone else

You can buy a life insurance policy for yourself or any person who granted permission and agree with the process of assurance of the company. The person who buys the policy the insured or the policyholder, and is responsible for the payment of insurance premiums.

People usually buy life insurance for themselves, to provide money to your spouse, dependent children or other family members. In some cases, you might want to purchase a life insurance policy for someone else and appoint yourself as the beneficiary. For example, if you are divorced and get alimony (child support, by its English name), it might want to buy a policy of life insurance for your ex-spouse, to replenish the loss of alimony in the event that your ex-spouse's death.

Creditors can buy life insurance policies to people who lent money. The policy death benefit will cover the balance of the loan in the event that the person dies before the end of the loan. 

Sometimes businesses buy policies to cover the lives of their employees or partners that are important to the company. This is known as insurance company, or purchase agreement.

Types of life insurance

There are different types of life insurance: term life insurance, permanent life insurance, a combination of both and death and accidental dismemberment.

Term life insurance

Term life insurance policies are generally less expensive and less complicated than the permanent life policies. There are two types of term life insurance policies: temporary life policy renewable annually (annual renewable term, by its English name) and term level (level term, by its English name):

• Temporary renewable life policy is annually for a term of one year, in which the insurance premium is adjusted each year based on your age when you renew the policy.
• The level term policy is sold with terms of five, 10, 15, 20, 25, 30 or more years. The insurance premium is designed to make it the same for the period of the term. Some level-term policies guarantee that the insurance premium will not change, but other policies only guarantee that insurance premium will not change for some years, although the term is longer. It is important to read the policy to know how long is guaranteed that your insurance premium will be the same.

Term life insurance policies typically only provide the benefit for death. You pay an insurance premium and if you die during the term of the policy, your beneficiaries receive the benefit for death. Term policies usually do not include a cash value or a savings component, and are not designed to provide coverage for your lifetime.
Term life insurance is designed to provide economic coverage during a time in which many people need it most, as when they are starting a family, to pay a debt or saving for College.

Term life insurance can be a good choice for young families with children. You may only need coverage until their children are adults and have their own income.

Features of term life insurance

The two most common features of term life insurance policies most are the ability of conversion and renewal.

The conversion capability means that you can change the policy for a permanent life insurance of equal value without having to have a medical exam or without having to go through the process of assurance. For example, you can transfer a convertible $100,000 term policy to a permanent $100,000 life insurance policy without having to answer questions about your health or your medical history.

Developing a policy will make your insurance premium increase since permanent coverage policies typically cost more than term life insurance policies. The conversion capacity can be an important feature if:

• his health worsens after purchasing the policy term
• You may not qualify for another life insurance policy
• you want to have a policy for life and which accumulate value in cash or savings.

Companies usually only allow members to convert term life insurance policies until they meet the 65 years of age.

The renewal capability means that you can extend the policy to obtain additional terms, regardless of their health, and without having to pass a medical examination. This may be another advantage of term life insurance coverage by increasing their age or if you get sick. Even if already it does not meet the criteria for assurance of the company, it should renew your policy. Please note that the majority of the companies offer insurance life term only up to a certain age, usually up to 70 or 80 years.

The terms are renewable each year, five, 10 or 20 years. Insurance premiums generally increase with each renewal term. Renewable premiums annually can be too high for major midlife policyholders. If you are paying high insurance premiums, which are renewable annually, it is possible to obtain another type of coverage, such as level term coverage.

Term life insurance payments

Term life insurance is usually paid in three ways:

• Level term coverage pays a benefit for death that remains the same during the term. For example, a policy of level term of 20 years with a $100,000 death benefit always will pay $100,000 even if the insured dies in the fifth year or the fifteenth year. Depending on the policy, your insurance for level term coverage premium will be equal or increase depending on the rated frequency.
• Decreasing term coverage pays a benefit for death that decreases during the term depending on the rated frequency. For example, a decreasing temporary policy of 20 years may begin with a benefit for death of $100,000 which will decrease $5,000 each year. If you died in the eleventh year, the policy will pay $50,000. Decreasing term coverage can be a good choice for parents, since the economic necessity for children generally decreases as they grow up. A disadvantage of decreasing term coverage is that its value of conversion also decreases each year. Insurance premiums generally remain constant during the term. Mortgage life insurance is a version of this type of term life insurance.
• Increasing term coverage pays a benefit for death on the term according to the rated frequency, which often is based on inflation. For example, a policy of increased term of 20 years may begin with a benefit for death of $100,000 that increases 5 percent of their nominal value each year. If you die in the twelfth year, the policy would pay around $155,000. Premiums typically rise each year according to the profit increase.

Permanent life insurance

Permanent life insurance policies usually have higher insurance premiums, since they are designed to provide coverage throughout their lives and have other features and benefits. The main characteristic of the majority of permanent life insurance is the component of value in cash or savings that grows over time and that during your lifetime you can remove, invert, or use it to ask for a loan.

Their initial insurance premiums by a permanent insurance are typically much higher than the of term insurance. There are two main reasons for this. The first, the policy probably has a feature of money in cash or savings with cash value, and the second, you are buying coverage for a longer period according to their current age. Usually, insurance premiums in an ordinary life insurance policy guarantee for life, which means that they will never change. The universal insurance life or variable life insurance policies can change with time. Be sure to understand how it is that their insurance premiums may change.

If you buy a permanent policy at a young age and continues with its policy until you reach middle age, chances are that your premium is cheaper than a term life policy with a comparable death benefit. This is true even if the death benefit is similar.

A portion of each insurance premium is applied in an account, known as the cash value, which increases with time. For regular insurance policies, life or universal life policies the number can grow to a fixed rate of interest. It may be linked to interest rates indexed in a provided life insurance policy. In a variable universal life policy, you can increase if the subaccounts you select increase. These sub-accounts are invested in stocks, bonds, or both.

A policy may allow you to withdraw the cash value, use it as collateral for a loan or use it to make future payments of insurance premiums. In some cases, if you remove all of the value in cash, the company cancelled the policy and coverage will end.

When you die, the beneficiaries receive the benefit for death of the policy. Depending on the type of policy, his beneficiary can receive the death benefit and the value in cash.

It may take several years for a policy to build up a cash value. Policies can also be a collection of rescue (surrender fee, by its English name) If you remove a part or all of the money before a certain time. You could also be liable for taxes on the money that remove from its value in cash.

It must take into account their needs before deciding which type of life insurance is best for you. Purchase a permanent life insurance policy and rescue her advance may not be a good financial decision.

Types of permanent life insurance policies

The two most common variations of permanent insurance are insurance ordinary life (whole life insurance, by its English name) and universal life insurance, also known as universal life with flexible insurance premium insurance.

Ordinary life insurance are maintained in force during all his life, at least you copper the value of the policy or stop paying insurance premiums. The policy renewal is guaranteed, therefore, you never have to renew the policy.

An ordinary life insurance policy insurance premiums are usually guaranteed for the lifetime of the policy. The premium is used to pay the benefit for death, to pay the insurance costs, expenses and profits of the insurance company and to increase the value in cash.

Some ordinary life insurance policies are participatory. This means that they could afford members an annual dividend. Typically, you can choose between receiving the dividend in cash, add it to the cash value of your policy to buy additional death benefits or use it to pay future premiums.

Dividends are not guaranteed. Some policies do not pay dividends according to the amounts that the company projected, while others may exceed the projection. Before purchasing a policy, ask for the history of projected dividends of the company versus the dividends that were actually paid.

Universal life insurance allows you to choose the amount of coverage, the insurance premium that paid and probably the cash value that will accumulate. If and when you make payments of insurance premiums and not to remove or take a loan of the value in cash, won by the value in cash interest rate is not reduced. The policy may continue in force until the date of maturity, which is usually to reach age 95 or 100 years. On the due date, the coverage ends and you receive the value in cash. Due to the flexible nature of this type of policy, review it annually to ensure that it has not changed. If that it has changed, make all the necessary adjustments to ensure that the policy will continue until the maturity date.

Some universal life policies pay a guaranteed rate of return. Others are variable universal life policies, whose value depends on the performance of the sub-accounts selected by the insured, which are invested in stocks, bonds and other investments. For this reason, agents selling life insurance in Texas variables must have a federal license values in addition to the standard insurance state license. Regulations and terms for flexible insurance policies are complex. Talk with an insurance professional life to make sure that you completely understand a policy before you buy.

A universal life policy will allow you to change the amount you pay in premiums of insurance, the death benefit or value in cash at any time. Any adjustments that will affect one or two other areas. For example, increase your insurance premium will increase either its value in cash or the death benefit, or both.

Many universal life policies offer the option of reducing your insurance premiums payments below the amount necessary to pay the costs of the insurance. Any deficit in the payment when compared to the cost of the insurance, shall be deducted from the cash value. If you make a payment of lower insurance premiums, take care to review your policy because if the cash value reaches zero, you will need to pay the full amount of the cost of the insurance or the policy is void. The company must send you an annual report with the amount of their value in cash and while the policy may take based on the cash value, as well as the cost of the insurance and the interest rate that applies to the value in cash.

Some of the universal life policies contain a clause for a secondary guarantee or a benefit of insurance without due premiums. The payment of insurance premiums needed to cover the cost of the insurance is primary. If the primary is not sufficient, a secondary security prevents that the policy expires, even if the cash value is zero.