Life Insurance: 6 Good Things To Know


 Life Insurance: 6 Good Things To Know

If you have a family, it’s likely that life insurance has crossed your mind. Why? Because it pays out in the event of death, and your loved ones may need some financial assistance after you’re gone. If life insurance is something that you’ve considered in the past but haven't taken any action on — it might be time to revisit this decision.

Think about the type of life insurance you need. Options can range from term life insurance to whole life insurance, and they all have specific features that are suited for different needs. The important thing is that you choose a policy that fits your financial goals and budget.

Fifteen good things to know about life insurance:

A whole life policy is one that pays out in an amount equal to the total premiums paid on a pre-tax basis. In other words, if you pay $100 in premiums, you'll receive $100 of death benefit when you pass.

How much life insurance do you need? When you're doing this math, it's best to include your spouse and children in your calculations. This will help ensure that everyone has the financial resources they need to continue living their lives without a hitch.

Term life insurance works differently than whole life insurance because it only pays out in the event that you die within a specified period of time. Once that period expires, your term life policy will expire with it. Term life insurance is much more affordable than whole life policies because it is generally cheaper, and many companies allow you to pay your premiums for a set number of years and stop if desired. You might decide to buy term insurance if you want to keep your family protected until after you're gone, but you're not interested in receiving a death benefit.

It's important to remember that there are various types of life insurance and that the type that is right for you depends on many factors. Do some research before making any decisions and consider having an experienced financial advisor review your options so that you can determine which policy is best for your situation.

Source: The Motley Fool, "15 Things You Need To Know About Life Insurance," Lisa Lutkus, Dec. 4, 2014

Title: "What You Should Know About Whole Life Insurance"

By Joe Moore | Money Morning | Posted May 15, 2012

The life insurance industry has evolved quite a bit in the last 50 years. Once upon a time, term life insurance was the only option for anybody who wanted to protect his or her family. Nowadays, there are several different types of whole life insurance policies to choose from — and that can be confusing. To help you decide which type of whole life policy is best for you and your family, here are seven things you should know about it.

Whole life premiums increase as you get older.

If you're interested in whole life insurance, it's a good idea to start with a term life policy and then switch to whole life as your circumstances change. That way, you'll have more coverage for less money. It also helps to compare the premiums on different types of whole life insurance policies side by side – in order to make sure that you get the best deal.

A five year lock-in period is common.

Most term life policies only last five years – at which time they will automatically renew at their full price and stop providing coverage. To avoid that from happening, you can allow your term insurance policy to lapse during that five-year period and then take it out again when it's time for renewal.

If you use a five year lock-in period, it's also important that you have enough money in your savings account to cover the cost of the policy if it lapses before its term expires. Otherwise, you could be left without any coverage at all.

Related: 5 Things You Should Know About Term Life Insurance Before Buying One

Your entire family will need to be covered.

It's crucial that everyone – including your spouse and children – are protected by a whole life policy when you're alive. Without it, there could be major financial repercussions for your family members after you're gone.

You can increase your coverage.

A whole life policy will stop paying out when you die, but you can continue to add to the amount of coverage you have with your policy by increasing the amount of insurance that's already in it. If you want to continue adding coverage, make sure that you've paid enough into your policy so that it will be worth more after the death benefit is exhausted.

Why pay more for whole life insurance than is necessary? Look for a good deal and then buy as much as you think is necessary. You never know what happens in life – so if something bad happens, having too little coverage could mean that your family's income could be affected or they may not receive any death benefit at all.

Return of premium policies have built-in dividends.

You can get built-in dividends from whole life insurance policies that return premium, but these types of policies are not recommended because they only provide a small portion of the total premiums.

What's more, the return on premium options will decline as you get older – and they also won't pay out very much if you pass away early in a policy's term. If you want to buy whole life insurance with a return of premium option, make sure that there is no cash value buildup in your policy – which could erode the value of your policy over time.

You can use your policy to fund your business.

It's possible for you to borrow against the cash value in your whole life insurance policy to help you start a business or keep an existing business afloat. Make sure that you have enough cash value in your policy so that you'll be able to make the required monthly payments – especially if any of those payments will be made while you're still alive.


Although there are many different types of whole life insurance policies to choose from, you should make sure that you're getting a good deal before you buy one. To help you decipher which type is right for you and your family, it's a good idea to read through the policy wordings on each of them. That way, you'll know exactly what they pay out and when they pay out after they're in place.

Also see: Life Insurance Basics: Everything You Need To Know Before Buying One

(c) Copyright 2015 International Asset Management Limited (“IAM”). All rights reserved. No part of this article may be reproduced without prior written permission of IAM.

Post a Comment

Previous Post Next Post