Availing a proper life insurance policy is an utmost necessity in today’s world. There are various benefits of availing a good life insurance policy. It can well be a financial asset to you and your family. There are numerous companies that offer life insurance, Moreover there are numerous plans too that one can choose from. However, whilst choosing a plan pone must keep certain things in mind. In this article we will discuss the merit of various life insurance policies and how beneficial they are. Nevertheless, what must be remembered is that each individual has different needs and one must go through the terms and conditions of each of the policies before paying for them.

Types of life insurance policies

Term life insurance –

These are the most common type of life insurance policies that are available in the market. They cost much lesser that the other forms of insurance policies. All one needs to do is to consider is the time period for which they are going to need the coverage and pay for that only. It is an utterly economical policy and is helpful for those who are looking for insurance that provides temporary coverage. However, there are certain disadvantages of this insurance policy. Once the coverage expires one has to get a fresh life insurance policy. And aged people find it difficult to avail this loan as companies are reluctant to provide this policy to aged people. One also does not get refunds if they happen to outlive the policy.

Whole of life –

A whole of life insurance is another imperative policy that is of prime importance. This type of insurance policy acts as a good way of saving. It is a permanent policy and you can be sure that you will get the assured amount once it matures. It is definitely a good, mode of saving money for the future. Considering the fragile economic condition of the world it is better to have a whole of life insurance. However, this policy too has its sets of disadvantages. It is expensive and requires one to pay premiums for a long period of time. That can be a financial burden at times. It is also not that easy to find a good whole life policy that easily. One needs to do a good bit of research before purchasing such an insurance policy.

Things to remember

There are certain things that one needs to remember whilst availing a life insurance policy. The first thing that needs to be done is a good research. A good research over the internet is a good way of finding a proper plan. Besides this, one can also resort to the help of professionals who have a fair idea about various plans and policies. They will take into consideration your financial conditions and will let you know, which policy to go with. There are numerous insurance companies; therefore before availing a policy it would also be wise to avail their quotes.

Life insurance policies are essential as they offer several alternatives for debt repayment, income replacement and estate planning for your family. Your demise could cause financial trouble to your dependents and could hurt their future if you will not protect them with life insurance policy.

Despite the obvious advantages of life insurance to a person’s financial security, many people do not show attention to the significance of this insurance product. Clearly, many don’t even consider buying a policy to secure their future.  But no matter how they try to dodge life insurance, it will remain as a necessity for people with financial dependents.

One shouldn’t just buy a life insurance without clear motivation or reason for acquiring the policy. There are some events or point in an individual’s life when getting a life insurance should be planned carefully. Normally, the idea of acquiring a policy emerge when financial responsibilities increase, such as marriage, birth of child or home purchase. It is also advisable that you buy a life insurance at a young age as rates are more affordable and coverage is easier to get.

Marriage

Marriage is a significant stage of any person’s life. It is also a notable time for you to think about buying a life insurance. For some people, this is the first time when they have somebody else relying on them financially and a financial problem could arise at the time of their death. A lot of people are still young at this phase, which normally makes them become more insurable.

No Coverage At Work

There are companies that provide life insurance as employee benefit. For employees who do not have insurance coverage or in case your employer reduce this from your benefit package, it would be prudent that you to obtain an insurance policy to secure your family’s future. In case you lose your job, you also need to buy purchase replacement coverage.

Birth Of A Child

One more reason to buy life insurance plan is the birth of your child. This generates supplementary living expenses that must be covered in case your other half passes away. Having children also requires you to have sufficient funds on hand for your child’s education. Keep in mind that as a family gets bigger, the demand for life insurance coverage also increases.

Home Purchase

Acquisition of life insurance should also be considered when a new home is bought. The death of one spouse leads to the foreclosure of their home because the surviving spouse can no longer pay for the mortgage. One accessible option for people is to buy a term insurance policy. The face value of this sort of insurance policy drops off as the mortgage declines.

When Other People Count On You to Support Them Financially

There are instances when elderly parents depend on the income of their adult children at the time they reach their retirement age.  If you want to ensure that your parents continue to obtain financial support in the event of the child’s death.

Life insurance policy buyers can now choose between whole life insurance and term life insurance. Before the introduction of TEFRA, buying whole life insurance policies was commonplace. The scenario changed after TEFRA’s introduction, and offered term life insurance leverage.

Why whole life insurance?

Many still prefer the old school whole life insurance. It has many benefits. One of them is it helps the consumers to cut down on the tax bill. Buying a permanent life insurance policy means your taxes will reduce during your lifetime, and also after you die.

That being said, lowering the taxes requires some planning. In this article, I am going to discuss it in details.

Tax free cash-buildup

Signing up for permanent life insurance implies you’d be paying a fixed monthly/annual amount as premiums. A portion of the money that you are paying as premiums goes into a savings account. As the money keeps getting deposited into the account, a cumulative interest rate generates. This way, a pile of cash gets built up in the account.

As the money piles up tax-free, the account ends up having an immense amount in it. The only catch is, you can’t withdraw the money because if you do, then it’d be taxed. Many people don’t withdraw the money, they let it grow thinking in the event of their death, their family members will receive it tax-free.

Benefits of tax-free account

No matter what experts claim, the US economy hasn’t quite recovered from the impacts of the recession. The mounting amount of national debt (currently clocked at $21 trillion), the increasing federal deficit, and the long-term crisis in the healthcare sector all contributed to the apparently grim future of the social security vertical.

To put it mildly, you are on your own. And you can’t expect a tax cut. Instead, taxes will rise. Signing up for a whole life insurance is one of the very few options left for you that allow you to save money safely from the tax axe, which grinds down one’s personal savings.

Social security benefits

One important aspect of earning within a whole life insurance is it doesn’t increase the tax that you pay to receive social security benefits. In case you don’t know, you pay income tax to receive up to 85% of the social security benefits.

Aside from that, all the non-taxable income, including municipal bond interest are taken in stride to consider the amount of benefits provided to you. The only exception is the money that grows with the accrual of interest rate within your whole life insurance account. No matter how much cash builds up in your insurance policy account, it won’t increase the amount of tax.

Tax problems solved

You can use your whole life insurance policy to solve tax problems. First of all, rebalancing within the policy is allowed. At the same time, several variations of permanent life insurance opens investment gates in front of you. Investing in bonds, real estates and international stocks are among the options.

A variable universal life insurance policy (VUL) is one such variation. If you sign up for this type, the cash value will grow depending on your underlying portfolio’s performance. When your total investment portfolio absorbs the underlying portfolio, reallocation takes place within the policy. But since it is not taxable, your profits remain untouched.

Lending provision

You can max out your permanent life insurance without fearing a tax cut. The problem is, when you withdraw the money, a tax will apply to it. There’s a solution, however, which whole life insurance policies offer. The solution is taking a loan. The money you borrow is from your cash value, and thus, will not be taxed. If you are sure that your income wile l increase in the upcoming years, then sign up for a whole life insurance policy because the state tax will increase, and the life insurance policy could function like shelter from tax.

The disadvantages

Alongside the advantages, permanent life insurance policies consist of a few disadvantages. Such a policy can be expensive. The difference between a term life insurance policy and a whole life insurance policy can be more than $3000 a year. If you make $30000 a year, then the premiums eat away 10% of your earning. Besides, there are other investment schemes that let you avoid tax. Such schemes include Roth IRAs, 401(K) plans, etc.

But despite the disadvantages, people still invest in whole life insurance policies because the policies secure their future, and shelter their savings from tax.

What do you think of the article? Would you follow the tips given here? Let us know in the comment section below.

Peter Christopher is a personal finance blogger and author. His passion for helping people to make solid financial decisions motivated him to start his own personal finance blog, where he writes about money management tips and frugality.

Thinking about buying a life insurance for the first time in your life? Then definitely there are a lot of questions roaming in your mind, related to the fact that what kind of policy would meet all your needs., what would be the best time to buy a policy.

SO, there are a certain thing which a life insurance buyers should always keep in his or her mind, at the time of buying a life insurance policy for the first time.

Figure-out Why You Need It:

It is quite natural a fact that most people might be in need of a life insurance at some point of their life. But, it is advised that you should never think about buying one because you have heard some good things about a life insurance policy. Life insurance has been designed for providing financial security to those people who has lost an earning member of the family. In spite of this fact, life insurance protection can also be available in paying a mortgage, a college education or even it can work as a key element in estate planning.

Opt for Buying What you can Afford:

Try to make a clear conception about the facts that are your requirements and what you can actually manage. Many people have no idea about how much life insurance they need for protecting their family; the most precious thing they care for. Yet, this is one of the biggest mistake which you can do, as planning a coverage out of your comfort zone, might not be a fruitful decision in your future. If you can’t afford the best plan for taking care of your family, then it is advised that, you should go for a plan which is effective and affordable at the same time.

Go for the Right Type of Policy:

After figuring out the fact that, how much coverage will you need for protecting your family in the future, you should concentrate on picking up the best type of life insurance policy for meeting all your needs. There are mainly two types of policy available- “Term Insurance” and “Permanent Insurance”.

Term Insurance has the capacity of meeting all your coverage requirements in exchange of a very affordable premium, on the other hand Permanent Coverage can add some guaranteed cash values over the lifetime of the policy. But nowadays, you can also opt for blending the above mentioned policies together for having a cost effective solution along with some long term protection.

Look at the Quality of the Provider:

The quality of the life insurance provider is very much important which you should consider at the time of picking a provider. Thus, there is a need for you to choose a company on which you can trust as long as you will be in need of the coverage.

Pick up a provider who knows the right way to invest your premium in a highly prudent manner for paying the claims of its policyholders. Your broker has a clear idea about the company where he or she is working and which company will be able to provide you with the best all-around value for your money.

Think Through your Beneficiaries:

A life insurance beneficiary is the person whose name is mentioned in your life policy for receiving the funds you have stored, in your absence. Your beneficiary can easily be a person, business or even a trust who will be receiving your funds in the event of your passing. The most important fact about choosing a beneficiary is that, you can even pick more than one of them. It’s important to make sure you think through who your beneficiaries are.

Consultation of a Financial Professional is Necessary:

It is also very important for the life insurance buyers to consult a financial professional who could provide you help with the factors like – financial considerations, taxes and your needs & also the needs of your family.

Working with an experienced person might provide you with the guidance, required for planning an insurance policy. Make sure the financial professional whom you have chosen is not too young as, the combination of two inexperienced parties does not bring any positive outcome in the future.

Conclusion:

Life insurance policies are an important part of our life, which has the capacity of protecting the life of your near and dear ones in your absence. Thus, picking up a wrong policy might become quite a huge mistake of your life which you definitely don’t want to make.

More often than not, insurance products looks for us and not the other way around. Put simply, we don’t do life insurance shopping, learning about it through a relative or a friend. A common misconception regarding life insurance is you can only benefit from it when you die. Not so. To understand its value, you might as well look into the diverse reasons to get yourself life insurance.

Here is the top 11 reasons to consider life insurance

1) Serves as a key source for final expenses

Final expenses, which may include burial expenses, inheritance costs, and estate taxes, are hard to bear. The funeral and burial expenses alone can be very costly. However, a life insurance can cover all of these costs.

2) Replaces lost income

When you die unexpectedly, your family will not only lose a loved one, but also the income that you contribute on a monthly basis. You are irreplaceable. Nonetheless, the lost income can be replaced by your coverage.

3) Covers mortgage(s) and other debts

Other than the final expenses, the cash value of the policy can also cover debts that you may reluctantly leave behind. For one, it is a form of mortgage protection.

4) Supports dependents

Aside from your monthly contributions, your financial supports to your aging parents, for example, will stop. This won’t happen if you have an insurance. Your parents may still enjoy their retirement even when you are no longer there.

5) Provides immediate access to cash

If, in case, you have an emergency, you may withdraw or borrow against your policy’s cash value. Insurance providers approve a loan regardless of the purpose of the insurer in securing such a loan.

6) Offers riders that accelerate the death benefits

While you suffer from chronic or terminal illness, you may acquire additional features. In this way, you may further ensure that your loved ones will not suffer financially, paying for your medical bills.

7) Ensures future insurability

Insuring yourself for your children and insuring them is the  most practical way of preempting the costly consequences of future health. This is about the family’s genetic blueprint wherein a family’s history of illnesses may take a heavy toll on their future financial security.

8) Meets evolving needs

Changing needs affect the financial security of a family. Speaking of riders, a life insurance product provides various features that can be changed or added suitable to the insurer’s new life circumstances.

9) Provides educational funds

College is very expensive nowadays; what more in the coming years? If your savings is not enough for the continuity of your children’s education, then a policy could be the answer.

10) Offers the possibility of leaving a legacy

Most of us are not very concerned with how we want people to remember us when we are gone. Also, if you are currently supporting a cause, what will happen when you die? The foundation, for instance, may continue with its operation if you will name it as one of your beneficiaries.

11) Renders support throughout the recovery period

A surviving parent, spouse or children may need to take some time off from work while nursing your loss. Likewise, getting used to the new family dynamics is not easy. The proceeds from your policy will help them get through this sad phase.

Evidently, there are many reasons to get yourself life insurance. A policy is actually one way of  protecting yourself and your loved ones against the risk of financial loss. At the same time, it helps in securing a bright financial future for them. Nevertheless, while there are many life insurance products out there, you should get the one that provides the most coverage at the least cost possible.

Buying a life insurance policy can be complex if you have a pre-existing medical condition. Although purchasing a life plan can be a tough process if you have a serious health problem, but it is not impossible. If you are determined to acquire a policy, anticipate that you will need to pay higher premium compared to applicants who are in better health. In addition, expect to get less coverage than what you want. You can obtain a policy through an employer or may want to take into account other options such as getting a savings plan. Below are few of the available alternatives that can meet your life insurance needs notwithstanding your present heath condition:

Guaranteed Issue Life Insurance

One of the options on hand for people with grave health conditions is guaranteed issue life insurance. There are quite a few companies that focus in this sort of policy. Most guaranteed issue life insurance plan have a graded benefit period. If you die in the first two or three years of the policy, your beneficiaries will only collect the premiums you paid plus some interest, but not the entire death benefit. In this type of life plan, premiums can be costly and benefits are minimal. Review your policy if you choose this kind of life insurance.

Rated Life Insurance

When you apply for a policy, there is a segment of questions in the application form regarding your health status. At any rate, answer the questions completely and candidly as these are necessary information that will be used to calculate the risk of your policy. If you die on the early years of the existence of your policy and the insurer learned that you lied or failed to disclose your health condition, the company can reject the claim for death benefit. As you submit your application in an insurance company, they can accept it, decline the application or offer you a rated policy. Accepting their offer for rated policy means that you agree to pay for a higher amount of premium.

Group Life Insurance

Basically, this type of policy is offered through an employer or union. Fortunately, there is no underwriting in this sort of life insurance in view of the fact that the risk is spread across the group. Group life insurance can endow you with much coverage. However, you may not be able to continue if you resign from your company. Ask your employer’s human resources department if the policy is portable. If the policy is portable then you are accountable for the premiums after you leave.

Alternatives to Life Insurance

If you have applied to several insurance companies yet you have not found the policy that really meets your needs, you may think about resorting to other options. The best option to secure your money is open a savings account. If you have a lump sum on hand, you can put your fund on a time deposit account and let it earn interest over time. On the other hand, you can just open a savings account and have you money accessible anytime your family needs it.