Life Insurance
Get A Life Insurance Quote In Queen Creek
There are many things to consider when it comes to getting a life insurance policy that can help protect your dependent’s future financial needs. There are millions of people in the US that say they need life insurance but don’t have it because they tend to overestimate the cost of it. The view that life insurance is expensive can greatly discourage someone from buying the life insurance that they need. Each life insurance policy is different and each state has a different guideline for regulating insurance policies. When deciding to get a life insurance policy, it’s best to have a personal consultation with a life insurance professional but at the same time, it’s good to have a general idea of life insurance beforehand. Let’s delve a bit more into life insurance so that you can make an educated decision when you decide to get it.
What Is Life Insurance?
Life insurance is a contract between you and your insurance company. In this contract, you will be paying for premiums and in return, the insurance company will pay a lump sum known as a death benefit to your beneficiaries after your death. In order for the contract to be enforceable, the life insurance application must accurately dictate the insured’s past and current health conditions and high-risk activities that they perform. Once your beneficiaries receive the money, they can use it for whatever purpose they’d like. This includes paying bills, mortgages, or schooling. Having a life insurance policy ensures that your family can stay in their homes and pay for the things that they need.
Types of Life Insurance
There are two primary types of life insurance namely term insurance and permanent life insurance.
- Term Life Insurance - Term insurance is the most affordable and popular type of life insurance. Over 70% of those who get life insurance choose to get term insurance. Term life insurance provides coverage for a certain amount of time and the price of the premium to be paid remains the same for the entire duration of the policy. Most policy lengths are around 10, 15, 20, 25, or 30 years long. If you pass away within the term of your policy, your beneficiaries can make a claim and receive the death benefit money tax-free. This is usually called pure life insurance because there’s no cash value component to the policy meaning that if the term expires, you do not get anything. You may be able to renew the coverage in increments of one year but each year of renewal will be at a higher rate.
- Permanent Life Insurance - Permanent life insurance provides coverage that lasts for your entire life. This is usually more expensive as it can last the entire duration of your life while building cash value. The cash value component accumulates on a tax-deferred basis over the life of the policy and acts as a savings portion of the policy. You can typically borrow against the policy’s cash value or make a withdrawal. If you decide to end the policy, you can get all the cash value less any surrender charge. Some policies have the cash value slowly build up through the years so you don’t necessarily have access to a lot of money right away. There are several types of permanent life insurance, such as:
- Whole Life Insurance: Whole life insurance offers a fixed death benefit and cash value component that grows at a guaranteed rate of return. A lot of whole life insurance policies payout dividends that can be used to reduce premium payments or can add to your cash value.
- Universal Life Insurance: Universal life insurance acts as a more flexible whole life insurance policy. You may be able to alter your premium payments and death benefit within certain limits. With universal life insurance, the cash value will build up depending on your policy type.
- Burial Insurance: This type of insurance is a small whole life policy with a small death benefit around the amount of $5,000 to $25,000. Burial insurance is designed to cover only funeral costs and final expenses.
- Survivorship Life Insurance: This insurance policy is also known as “second to die life insurance.” Married couples usually avail of this policy as it insures two people under one policy. When both spouses have passed away, the policy pays out the death benefit to the beneficiaries. Usually, survivorship life insurance is part of a larger financial plan to fund a trust or pay taxes.
Why Do You Need Life Insurance?
There are three main reasons why you’d want to get life insurance:
- To pay for burial and final expenses - A lot of people underestimate how much a funeral can cost. Americans usually pay around $7,500 for a funeral. This does not include the price of a vault, which most cemeteries require. A vault can range from around $900 to $7,000. 83% of Americans get life insurance for this reason.
- To replace income - If you died leaving behind a spouse or children, it may be difficult for them to make ends meet without your income, especially if the death is unexpected. Money from a life insurance policy can help maintain your family’s standard of living and can help them pay for their expenses. Around 70% of consumers get life insurance for this reason.
- To leave an inheritance and transfer wealth - Life insurance greatly helps ease the financial burden that your family will face once you’re gone. Money from a policy can help cover monthly bill payments or pay off entire balances. 65% of consumers get life insurance for this reason.
Before purchasing life insurance, make sure to determine your needs first. You should calculate how much debt you have and your current living expenses. Choose a company with a strong financial rating and make sure to get a quote prior. It’s still best to have a one-on-one appointment with your insurance agent to make sure all your questions are answered. Make sure to read your policy and choose one that you’re sure you can afford.