What is a life insurance policy?
A life insurance policy is a contract between an insurer and a policy owner in Fayetteville, AR. The policy owner pays premiums to the insurer, and in exchange, the insurer agrees to pay a sum of money to named beneficiaries upon the policy owner's death.
When to get life insurance?
If you have a family, are married, or have any debt, buying life insurance coverage is a smart move for financial protection. It's one of the most cost-effective ways to protect the people who depend on you financially. Without this insurance, your family would be at risk if you died prematurely. They might not be able to maintain their current lifestyle, send their kids to college, pay for funeral expenses or mortgage. Your spouse would also have a hard time dealing with one income. It somehow gives the policy owner peace of mind.
If all of the scenarios mentioned above are applicable to you, well, hopefully you already have life insurance. Here are a few other reasons to have this type of insurance:
- charitable donations
- pay federal death and estate taxes
- create an inheritance for your heirs
- pay final expenses
Who Needs Life Insurance?
Here are some examples of people who should consider getting a life insurance:
Wealthy families who expect to owe estate taxes - For wealthy families who have a lot of properties, having life insurance can help pay for estate tax.
Adults who own a property together - If a couple purchased a house and is still under mortgage, then suddenly one of the partners dies. Having life insurance can help cover for the loss of income, especially if he/she cannot afford to pay the loan alone.
Parents with minor children - If a parent dies, the loss of their income could affect their children. Life insurance can make sure the kids have financial resources until they can support themselves.
Parents with children who have special needs - For those who need lifelong special care and can never earn for themselves, life insurance can support them even after their parents pass away.
Children or young adults who want to lock in low rates - The younger and healthier you are, the lower the premium will be. A young adult may buy life insurance even if he/she has no dependents yet but expects to have it in the future. This can help her save money.
What are the types of life insurance?
There are three main types of life insurance: Term Life, Whole Life and Variable Life Insurance
Term Life
Think of term life insurance as temporary life insurance. This type of policy only covers a certain span of time during your life. Once it reaches the end of the span, or “term,” it expires.
The only way your term life insurance is useful is if you die before the expiration date. In the case of the latter, the money would go to your heirs or the executor of your estate or whomever you designated to cover your death expenses. But if you don’t die, you basically paid those monthly premiums for nothing. It’s all gone after the policy expires.
You also can’t take out a loan against it the way you can with a permanent policy, for obvious reasons. After all, it’s a temporary policy. Unless you die soon, that money will no longer be available after the expiration date.
Whole Life
Just as we told you to think of term life insurance as temporary, we ask you to think of whole life insurance as “permanent.” This is a policy that you will, ideally, keep for the rest of your life. There is no expiration date on it, and it is payable as soon as you die.
Since whole life insurance is permanent, you are allowed to take out a loan against it. You can also invest part of your premium payment to increase the policy’s cash value.
Variable Universal Life
A variable universal life insurance policy gives you a wider range of investment options for your cash value. You may choose to invest in mutual funds or fixed accounts. It can have a high growth potential, but it also comes with higher risk. The value of your insurance policy depends on the cash value of your investment. It will depend on the market performance, so there is no limit.
How Are My Life Insurance Rates Determined?
As with any type of insurance, some factors can affect the cost of insurance. Common causes of price changes in life insurance are:
Age
With a longer life expectancy and less risk, younger shoppers often enjoy lower premiums. Many insurance policies don’t change premiums—meaning that if you buy life insurance while you’re young, you enjoy the lower rates so long as you hold that policy. As you get older, the price of starting life insurance will almost always rise.
Sex
With a longer life expectancy (and therefore more years to pay premiums) women often receive slightly lower rates than men.
Health History
Not only your personal health history, but the health history of your family members can play a role in how much you pay for life insurance. Many policies require a health examination or a medical exam before they’ll determine your rates, though there are companies that offer plans with no exam. Often, these cost more.
Hobbies
Don’t worry. You’re not going to see a spike in your life insurance rates if you enjoy painting over knitting. But you might if you frequently participate in high-risk activities. If you’re a lover of skydiving, motorcycle racing, mountain climbing, or other extreme sports and high-risk hobbies, you may find you have higher rates than your friends who prefer reading and playing chess.
Smoking History
Smoking comes with health risks, and insurance companies aren’t a big fan of health risks. If you smoke, expect to see higher premiums.
Policy Type
Term life insurance usually costs less than Permanent/Whole. However, other policy types within Whole insurance have their own rates.
Bundling
You can often save on life insurance if you bundle it with other insurance plans like homeowners insurance or car insurance.
Curious what rates are available to you? G&G Insurance can help you find a quote in no time!
How Much Life Insurance Do I Need?
Many people make the mistake of basing their insurance coverage on a guess, without realizing how inflation can impact their life insurance proceeds.
Working with an independent agent can help you determine the exact amount of coverage you need, based on a number of different variables, including the number of children you have, your future earnings potential, whether or not you are married, your spouse's future earnings potential, and your ages.
How Are My Life Insurance Rates Determined?
Depending on your current financial situation, as well as your health, you may find term life or whole life more attractive. To make it easier for you to decide, we made a list of pros and cons of term life and whole life insurance on our blog.
You may use our Life Needs Analysis page to estimate the amount of life insurance you need.
We Make Buying Life Insurance Easy
At G&G Independent Insurance, we make the process of buying insurance extremely simple. We have access to a wide range of life insurance companies so we can survey the marketplace and based on your individual rating criteria, find the best possible life insurance policy at the best price.
Call us to get life insurance quotes for you and your family.
