What You Should Know About Life Insurance
Life Insurance Upstate is designed to provide a death benefit to your chosen beneficiaries. It can be temporary (term) or permanent – as long as premiums are paid.
Whole life insurance provides a premium and death benefit throughout your lifetime and builds tax-deferred cash value. It also has adjustable premiums based on long-term interest, expense, and mortality estimates.
- It pays out if you die.
As its name suggests, Life Insurance is designed to provide a death benefit to beneficiaries when the insured passes away. Beneficiaries are specified when the policy is purchased, although you can change them later as circumstances change. It’s important to designate primary and contingent beneficiaries because if you don’t, the death benefits may go through probate and end up in someone else’s hands (like the deceased’s estate).
If the insured and beneficiary die simultaneously, a complicated formula determines who receives the payout. In most cases, the insurance company will decide if the beneficiary died before the insured or vice versa and then pay out accordingly. Depending on state law, the death benefits are paid to the beneficiary’s heirs or the beneficiary’s estate if the beneficiary dies before the insured.
In most whole-life policies, a small portion of your premiums accumulates as cash value. This is not included in the death benefits, but you can borrow against it at a rate of interest (although outstanding loans reduce the death benefit amount). The death benefits are paid out when you die and are separate from your policy’s cash value. However, some companies offer a rider that lets you combine the two and increase the death benefit while alive. This is called paid-up additional insurance.
- It pays out if you become disabled.
If you become disabled, a disability rider in your life insurance policy can help pay out an amount of your death benefit if you’re no longer able to work. This type of rider is typically more affordable than standalone coverage. However, be sure to understand the terms of your policy before purchasing one, such as how long it covers you and if there are any exclusions or limitations that could prevent you from receiving a payout.
Many people with disabilities purchase life insurance in addition to their disability insurance, and it can be an excellent way to protect against financial risk. For example, suppose you’re an empty nester or retired person who names adult children as beneficiaries of their policy. In that case, it can give them enough money to accomplish important goals after death.
In most cases, a person with a disability can qualify for a traditional life insurance policy if their disability doesn’t affect their life expectancy or health history. If you have a serious medical condition, working with an independent broker who understands your situation and how insurers rate it can help you find the right policy. At Policygenius, our licensed experts can walk you through the life insurance buying process while offering transparent, unbiased advice. We can even help you compare options and prices from multiple insurers. Whether you’re looking for whole or term life insurance, we can help you get the right protection.
- It pays out if you become ill.
In addition to covering your family’s end-of-life expenses, Life Insurance pays out if you become ill. The specifics depend on your purchase policy, but many policies offer a living benefit. This allows you to access a portion of your death benefit while alive and can help pay for medical expenses such as hospital bills, nursing home costs, or even an unexpected trip abroad.
Typically, you’ll need to undergo a physical exam as part of the Life Insurance application process to determine your health status. Blood and urine tests will measure your cholesterol and glucose levels. The more healthy and fit you are, the lower your premium will be. This is why younger people tend to pay less for Life Insurance than older people. Women, nonsmokers, and those without complex medical issues also often receive preferential pricing.
The most common type of Life Insurance is term life, which covers you for several years. However, you can also buy permanent life insurance. These policies last a lifetime, and some include a cash value component that grows over time. This can make them more expensive, but some people find it worth the peace of mind.
It’s important to note that there are a few things that your Life Insurance will not cover, including suicide. This is because most policies contain what’s called a suicide clause, which voids the policy if you commit suicide within a certain period, usually two years after buying the policy.
- It pays out if you are a parent.
If your parents are getting older, consider life insurance. A payout from a policy could help cover funeral expenses, outstanding debt, and legal fees associated with the estate process. It can also cover living expenses, like nursing home care if necessary.
However, buying a life insurance policy for your parents has its challenges. The most important thing is ensuring you have “insurable interest.” In other words, you need to prove that your financial situation will be negatively impacted if your parent passes away. Children automatically meet this requirement, but other adults may need documentation to demonstrate their relationship and why they should be covered.
In addition, you’ll want to ensure your parent has consented to the policy and can answer application questions and participate in a medical exam. With their permission, you can only buy a life insurance policy for someone else, especially senior citizens.
The best way to explore your options is with an experienced life insurance agent. They can fully examine your circumstances and recommend the most appropriate policy for you and your family. Several types of life insurance policies include term and whole life insurance. Some policies, such as guaranteed issues and simplified life insurance, don’t require a medical exam or health questionnaire. However, these policies tend to have higher premiums than other types of life insurance.
- It pays out if you are a spouse.
Life Insurance can help cover funeral costs, pay off debt, replace income, and keep you on track for larger financial goals. But it’s important to discuss it with your spouse or significant other to determine what kind of coverage you need and how much it will cost.
In addition to helping your spouse or partner pay off debts and maintain a certain standard of living after you die, life insurance can also be useful for those with children. This is because the loss of one parent can lead to financial hardship, especially if it’s the primary breadwinner who passes away. Life insurance can pay for things like child care and mortgage payments and even help cover alimony and other financial obligations.
Many employers offer supplemental or voluntary spouse life insurance as part of their benefits package. These policies are typically cheaper than individual life insurance policies but have some limitations. For instance, you may be unable to change the beneficiary and lose the policy if you leave your employer.
Spouse life insurance is a type of permanent life insurance that pays out a death benefit to your spouse after you die. Unlike term life insurance, a permanent policy can last your entire lifetime and offers a built-in savings component known as cash value, which accrues over time. The benefit of this feature is that it’s tax-deferred, just like a 401(k) plan or an individual retirement account.
- It pays out if you are a child.
Although a life insurance policy won’t replace your child, it can help ease the financial burden of losing them. It can also provide a safety net for unexpected expenses your family may incur. However, before buying a policy for your kids, it’s important to consider your financial situation and ensure you’ve tackled other priorities first, like building an emergency fund or saving for retirement, Meldrum says.
Most life insurance policies for children are whole life, meaning they’ll remain in effect for your child’s entire life as long as the premiums are paid. However, these policies can be expensive, and many don’t offer competitive rates compared to term life insurance. Whole-life policies also have a cash value component that grows tax-free over time.
Depending on the policy and insurer, some life insurance policies for children allow early access to cash value, which could be used for education, medical expenses, a down payment on a home, or other purposes. This can be an attractive feature for parents who are concerned that their child might develop a health condition that would make life insurance cost-prohibitive or impossible to obtain as an adult.
You can buy a life insurance policy for your child as young as 14 days old; typically, no medical exam is required. Usually, birth or adoptive parents or legal guardians can purchase the policy. If another family member wishes to buy a life insurance policy on behalf of a child, they’ll need the written consent of the parent or legal guardian.