Life Insurance Policy Information

A life insurance policy is a contractual agreement between an insurance carrier and an individual, and in some cases, a couple.  The provider guarantees benefits to be paid in the event of the policy holder’s death.  These benefits are generally tax free, and can be paid to any beneficiary the insured designates.  Life insurance also has other benefits, such as savings and investment features, and additional benefits for serious illnesses or other conditions.  Prior to examining specific life insurance policy information, gaining an understanding of the three main types will aid in the overall life insurance buying process.   

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Detailed Life Insurance Policy Information

Universal life insurance is the most flexible of the three main life insurance policy types.  Universal life insurance pays benefits in the event of the insured’s death, provided premium payments have been met.  These premiums are used to pay for the cost of insurance, and to build cash value and be invested by the life insurance carrier.  Universal plans often guarantee a minimum return on the investments made, but life insurance policy information for particular types should be consulted as to amounts and conditions.  The accumulated cash value in a universal account can be used to take a reprieve from making payments, to make less than the normal premium, or for other purposes such as loans and withdrawals.

Term life insurance provides death benefits for a specific period of time provided the insured makes regular premium payments.  When the term of the plan expires, the death benefits are no longer available, and premium payments cease.  Term life insurance covers individuals when an inexpensive plan is needed for a short period of time.  The plan does not build cash value or have an investment feature, but they are easy to obtain and are far less expensive than other types of life insurance. 

Life insurance policy information for whole life policies are fairly straight forward: whole life insurance covers an individual for their entire life as long as the premiums are paid on time.  The premium and the death benefits are fixed for life.  Whole life policies are like universal life policies in that they both have a savings and investment feature.  Whole life policy premium contributions build cash value that is invested by the insurance carrier, and returns are shared with the policy holder.  Cash value accumulates tax free, and can be withdrawn, borrowed against, offered as collateral, or used to purchase additional insurance. 

Who Should Invest in Life Insurance

Everyone should invest in life insurance at some point in their life; especially in situations that most people would not think to purchase life insurance in.  For instance, imagine that a parent has died and left 2 small children behind with the surviving spouse.  A grandparent moves in with the family to help provide child care and other domestic assistance.  This grandparent should purchase life insurance, because in the event of their death, the children will still need to be cared for; and child care costs can be very expensive.

As another example, consider the case where a primary wage earner in a small family is injured and cannot work for a year.  In this situation, another family member may step in to supplement the family’s income during that time.  Circumstances like this would necessitate that the generous family member purchase a short term life insurance policy to protect the family in the event of their death. 

Traditionally, single adults with no dependents were advised that they probably did not need life insurance, but this could not be farther from the truth.  Single people have debts and obligations that need to be paid, and in the event of their death there may be final medical expenses, funeral costs, and burial expenses.  Life insurance will protect this individual’s family and/or friends from financial stress by providing benefits to cover all of these expenses.  Similarly, college or graduate students who have accumulated large amounts of student loans should consider life insurance to protect these debts from falling on their parents. 

The people who most frequently need insurance are primary wage earners and child care providers.  Life insurance protects family members by providing benefits to replace lost income, to pay bills and debts including mortgages and taxes, and to provide funding for the future tuition expenses of children.  When planned carefully, life insurance can also be a valuable savings and investment tool when included as part of estate or retirement planning.  For this reason, life insurance is an important asset to families that are young and growing, and families that are mature and less active.  Life insurance is also a wise investment between two business partners.   

The Life Iinsurance Buying Process

Obtaining relevant life insurance policy information must begin with a personal financial assessment.  Doing so will help determine which type of policy is needed.  A total summary must be made of the coverage needed to replace lost income, maintain lifestyles, fund surviving spouses, care for children, fund tuition expenses, pay for taxes,  and to pay for charitable giving.  In general, the death benefit of a policy should pay about 7 times what the insured earns in a year; though ultimately there are more factors involved and the total coverage should meet exceed the total needs as detailed in a financial assessment.

The next step is to research insurance providers.  The customer service record, better business bureau reports, claims history, and financial security of the insurance provider should be examined.  A good place to start is here:  Insurance Company Ratings.  When suitable insurance providers have been found, their individual policy types and sub types can be reviewed to determine the best fit for the individual’s personal life insurance needs.  Life insurance policy information can be found online, at local insurance sales offices, by speaking with a life insurance broker, and at some financial advisor’s offices.  The entire process can take place locally or online, and payments of premium can be setup to be automatically debited from a checking account.

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