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Deconstructing Life Insurance

Discovering the Benefits of Life Insurance Helps Secure Financial Stability for You and Your Family.

Life insurance is the protection you can provide for your family after you have died. A lot of people have reaped the benefits of life insurance, but despite this fact, a lot more has yet to be acquainted with this form of insurance. Let us try to demystify life insurance and break it down to its bare essentials.

Obtaining life insurance is not an ordinary purchase. It is unlike any other item you will ever buy because when you buy life insurance, you are actually making an investment into your family’s financial security for the future. At the very least, your life insurance will definitely pay for your funeral and burial expenses when you die. But it can also protect your home against foreclosure, and provide your family with funds they can use for their day to day expenses when you die.

Selecting the right life insurance policy can be a bit daunting. There are a number of factors that a person should consider when customizing their life insurance plans. So it won’t hurt for would-be buyers to familiarize themselves with the intricacies. This way they will know what questions to ask their insurance agent when they do finally decide to buy.

While life insurance policies these days can be customized to provide financial capabilities for different scenarios, one should not lose sight of the fact that life insurance works as a general financial security blanket for with the people they will be leaving behind. If your primary goal is to have enough funds to live comfortably during your retirement, or maybe to fund your children’s college tuition, then you had best check out other financial protection products other than life insurance.

The first question to ask is why you need life insurance. If you are serious about ensuring the welfare of your family in your demise, then this type of insurance must always be taken into account when you do your financial planning. Life insurance benefits can replace the income you make. With life insurance, you can rest assured that your family will be able to shoulder all of your obligations, and would still have enough funds to maintain their current lifestyle. A feature you will love about life insurance is that your family can enjoy its proceeds without paying income tax payables.

After ascertaining your need for life insurance, the next thing to determine is how much of it you actually need. You should gather your personal financial data and evaluate the needs of your family. The things that you need to think about when deciding how much coverage to get include the immediate expenses when you die. There would probably be hospital bills to settle, in addition to the funeral and burial arrangements. Your family’s adjustments to your passing may require funds; they may need to move house or to seek employment. The rule of thumb when deciding on the amount of coverage to purchase is about seven times the buyer’s gross annual income.

The more popular and affordable type of life insurance is term life. This policy offers financial protection for a fixed period of time and your loved ones will only get the proceeds of your policy if you die during this specific time. The terms available can go up to about 30 years. If at the end of the term you are still alive, the logical step is to renew the policy but this time the premiums will be higher. Insurance companies will inquire you to furnish them an evidence of insurability document if you plan to renew your life term policy to keep your premiums low.

Permanent life insurance provides financial protection for your beneficiaries at whichever time you die, granted of course that you are religiously paying your premiums. These policies are structured over the long term. Permanent life has a number of sub-categories including ordinary, universal, adjustable, variable, and whole life. These insurance-types will mostly have a cash surrender value, which means that you may surrender the policy in exchange for a lump sum. Now if your policy is in its first few years, there may not be any cash value left as there are other charges the providers will take out from the policy. If at any point you would need to stop paying premiums, your permanent life insurance policy can be converted to a term life using the cash component of the policy as premium payments for the new policy.