Life insurance basics

Life and Health Insurance

Life insuranceMany people buy life insurance to make sure loved ones remain financially secure in case of death. Life insurance can also be a tool in estate planning, cash accumulation, wealth transfer and estate tax liquidity as well. There are many choices when it comes to life insurance. Policies are now available from more than 2,000 life insurance companies in the United States , as well as from banks and other financial institutions.

Assessing your life insurance needs There are some basic things to consider, when you are buying life insurance:

  • Before purchasing a life insurance policy, you should consider your financial situation and the standard of living you want to maintain for your dependents or survivors. For example, who will be responsible for your funeral costs and final medical bills? Would your family have to relocate? Will there be adequate funds for future or ongoing expenses such as daycare, mortgage payments, or college?
  • You should reevaluate your life insurance policies annually or whenever you experience a major life event such as marriage, divorce, the birth or adoption of a child, or purchase of a major item such as a house or business.

Attorney Michael Dobronos believes that,

“The basic question that you honestly need to ask yourself: In the event that you predecease your family, how will they survive financially?

  1. Who will pay the funeral bills, which now average over $100,000?
  2. An untimely death usually means very large medical bills that health insurance may or may not fully cover. Do you want your wife and children to maintain the same standard of living that they are currently accustomed to?
  3. Will your failure to plan ahead, after predeceasing your family, cause them a hardship for a generation? Such poor planning could affect multiple generations, prevent your children from attending college, searching for the ever scarce and financially unrewarding blue collar job. Will your immediate family have to sell the family home to make ends meet and live on rent?

Two key factors in purchasing life insurance include the number of your dependents and the standard of living you want to provide them. I believe most people want their immediate family needs that they may not survive them. Life insurance is the best financial substitute for the primary breadwinner in the family.Equally, when a non-working spouse predeceases her immediate family, the cost to replace the services rendered by that spouse at home is astronomical. Usually the non-working spouse is a chauffeur, organizer, purchasing agent, bill payer, cook, chef, laundry person, housekeeper, butler, and most important a day care provider. The widowed spouse with young children will most likely require the most life insurance you can afford in order not to compromise their standard of living.

Also, some life insurances require detailed medical histories and in some cases examinations.

To get the biggest bang for your buck, quit smoking. Quitting smoking will buy you more insurance at a cheaper price.” The reasons someone might buy life insurance will vary, depending on age, financial situation and other factors. Listed below are some examples:

  • Single person with no dependents: Funeral expenses; medical bills; debts, such as credit cards or student loans; elderly parents who may be dependent for support. Note: Buying life insurance at a young age is cheaper. As a person ages or incurs a serious health condition, it will be more expensive or difficult to buy a policy.
  • Single person with dependents: Funeral expenses; medical bills; outstanding debts; caretaker expenses for surviving dependents; education costs for surviving children.
  • Couple with no children: Funeral expenses; medical bills; outstanding debts, especially mortgage or car payments.
  • Couple with children: Funeral expenses; medical bills; outstanding debts, especially mortgage payments; child-rearing expenses; education costs. Note: Even if one partner does not work outside the home, a policy holder may want to consider life insurance to help pay for childcare or other services performed by that partner.
  • Older couple: Funeral expenses; medical bills; impact on spendable income; outstanding debts, such as a new home, second vacation home, or recreational vehicle; impact on assets that may be left for children or grandchildren.

When purchasing life insurance, it is beneficial to know the language of the industry, Know the difference between term, permanent, universal, convertible term, whole life, and ordinary life. Understand also whether the company has offered a teaser rate which are increased on a yearly basis, or if it fixed for a term such as ten years, etc.

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