Basics of Life Insurance How much I need, what type of life insurance

Life insurance is an agreement between you (the policy owner) and an insurer. Under the terms of a policy of life insurance, the insurer agrees to pay a certain sum to a person you choose (the beneficiary) upon your death, in exchange for its awards. Proper life insurance coverage should provide you with peace of mind, knowing that those who worry it will be financially after the death.

The many uses of life insurance

One of the most common reasons for purchasing life insurance is to replace the lost income that would occur in the event of your death. When you die and your salary stop, your family may be left with limited resources. Proceeds from a life insurance policy to make cash available to support your family almost immediately after your death. Life insurance is also commonly used to pay the debts that you may leave behind. Life insurance can be used to pay mortgages, car loans, credit cards and debts, leaving intact the other remaining tasks for your family. Proceeds of life insurance can also be used to pay final expenses and estate taxes. Finally, life insurance can create a legacy for your heirs.

How much life insurance you need?

What you need life insurance depend on a number of factors, including whether you are married, the size of your family, the nature of your financial obligations, your career stage, and your goals. For example, when you're young, you can not have a great need for life insurance. However, as you take on more responsibilities and your family grows, your need for life insurance increases.

There are a lot of tools to help you determine how much coverage you should have. Your best resource may be a professional. At the most basic level, the amount of life insurance coverage that you need to directly correspond to your answers to these questions:

 What immediate financial expenses (such as debt repayment, funeral expenses) would your family face on your death?
How much of your salary is devoted to current expenditure and future needs?
How long will your dependents need support if I were to die tomorrow?
How much money would you leave for special circumstances of your death, such as funding programs for education of your children, gifts to charities or as an inheritance to your children?

As your needs change over time, you have to constantly re-evaluate your need for coverage.

How much life insurance you can afford?

How do you balance the cost of insurance with the amount of coverage your family needs? So how different variables determine how much coverage you need, many factors determine the cost of coverage. The type of policy you choose, the amount of coverage, your age and your health all play a role. The amount of coverage you can afford is tied to your current and expected future financial situation, as well. A professional financial or insurance agent can be invaluable in helping you choose the right insurance program.

What's in a contract of life insurance?

A life insurance contract is made by law, the application (that identifies who you are and the medical statements), and a page that describes the specific policies the policy has been selected, including any options and riders who have purchased in exchange an additional premium.

Provisions describe the conditions, rights and obligations of the parties to the contract (for example, the grace period for payment of premium clauses, incontestability and suicide).

The Policy page describes the specific amount to be paid upon your death and the amount of premiums required to maintain the policy in force. He also said the pilots and the options are added to the standard policy. Some riders include the waiver of premium rider, which allows you to skip the payment of premiums during periods of disability, guaranteed insurability rider, which increases the amount of your insurance, without further medical examination, and accidental death benefits .

The insurer may add an endorsement to the policy, when issued to amend a provision of the standard contract.

Types of life insurance policies

The two basic types of life insurance are term life and permanent (cash value) life. Policies to provide long term protection of life insurance for a certain period of time. If you die during the coverage period, the beneficiary receives the death benefit policy. If you live to the end of the term, the policy simply terminates, unless it is renewed automatically for another period. Long-term policies are available for periods of 1 to 30 years or more, and can, in some cases, be renewed until they reach 95. Premium payments may be increasing, as every year, renewable for 1 year (period), or level (equal) up to 30 years long-term periods.

Permanent insurance policies provide protection for life, you have provided to pay the premium to continue the policy in force. Premium payments are higher than necessary to provide the benefit of life insurance in the early years of the policy, so that a reserve can be accumulated to cover the deficit of the premiums required to provide insurance in recent years. If the policyowner discontinue the policy, this reserve, known as the cash value, it returns to the policyowner. Permanent life insurance can be further divided into the following basic categories:

    Whole life is generally make level (equal) premium payments for life. The death and the cash value are predetermined and guaranteed. Policyowner's only action after purchase of the policy is to pay the fixed premium.
    Universal life: you can pay premiums at any time, in any amount (within certain limits), provided that the costs of the policy and the cost of insurance coverage are met. The amount of insurance coverage can be decreased, and the cash value will grow at a stated interest rate, which may vary over time.
    Variable life: As with all life, you pay a premium level for life. However, the death benefit and cash value fluctuate depending on the performance of investments in what are known as subaccounts. A sub-account is a professionally managed pool of investor funds to pursue a stated investment objective. The policyowner selects the subaccounts in which the value of money must be invested.
    Variable Universal Life: A combination of universal life and variable. You can pay premiums at any time, in any amount (subject to limits), provided that the costs of the policy and the cost of insurance coverage are met. The amount of insurance coverage can be decreased, and the cash value goes up or down depending on investment performance in sub.

Choose and change the beneficiary

You must name a primary beneficiary to receive the proceeds of your insurance policy. Your beneficiary may be a person, corporation or other legal entity. You can name more beneficiaries and specify what percentage of the net benefit is to receive any death. If the name of your minor child as beneficiary, be sure to designate an adult as custodian of the child in your will.

Generally, you can change your beneficiary at any time. Changing the beneficiary, usually requires nothing more than signing a new designation form and sending it to your insurance company. If you have named someone as an irrevocable (permanent) beneficiary, however, will need the permission of that person to adjust any of the provisions of the policy.

Where can I buy life insurance?

You can often get insurance coverage from an employer (for example, through a group life insurance plan offered by your employer) or through an association to which it belongs (which may also offer group life insurance) . You can also purchase insurance through a licensed life insurance agent or broker, or directly from an insurance company.

Any policy that you buy is only as good as the company that issues, then investigate the company that offers insurance. Ratings services, such as AM Best, Moody's and Standard & Poor's, evaluate the financial strength of an insurer. The company offers coverage should provide this information..