The main reason for life insurance is to provide income replacement to your beneficiaries if you die. But if you are interested in estate planning, cash accumulation, wealth transfer, and estate tax liquidity, life insurance can also help you achieve these goals.
Life insurance policies are now available from more than 2,000 life insurance companies in the U.S., as well as from financial institutions that are now getting into the marketplace. It’s just as important to understand the companies behind the products as it is to understand the products themselves. I will help you monitor the financial strength of the individual insurers. This is especially important when you’re buying life insurance, because policies will probably pay out many years from now, maybe even decades from now. Therefore, you’ll want to know whether the company you’re buying from will be solvent down the road.
VARIOUS TYPES OF LIFE INSURANCE
Final expense insurance can help ease that burden by paying for many of the costs associated with funerals. With the high cost of funerals, the last thing anyone wants to think about after they lose a loved one is paying for and planning final arrangements. However, it is a sad reality that may people have to face the problem of not having the proper coverage to prevent such occurrences.
Who Can Buy Final Expense Insurance Coverage?
Anyone can buy final expense insurance. Most often, however, it is purchased by those who are near to death and do not already have a regular life insurance policy in place. Many final expense insurance policies can be underwritten without the designated insured submitting to a medical exam. These no-exam policies contain higher rates for the insurance, but are still less expensive to buy than regular life insurance because of the low face value of the policy.
Term Life Insurance
Non-Guaranteed term life provides coverage only for a short time (usually 10, 20, or 30 years) and is pure death-benefit protection. The risk with term life is that your health might deteriorate and you could be unable to get another policy once the term is up. However, term life insurance is usually a sound choice for young people who can’t afford the higher expense of permanent insurance, or for people covering specific needs that will disappear in time, such as a car loan or a mortgage.
Yearly Renewable and Convertible Term
Yearly renewable term insurance offers a longer term, usually for five, 10, or 20 years. By buying a longer term policy, your costs can be stretched out to avoid the annual increases found in non-guaranteed term life.
Convertible term is like yearly renewable term but it also offers conversion to a permanent policy in the future — when regular term premiums might become cost-prohibitive or if your health declines. Convertible term policies usually provide the maximum protection with the smallest amount of cash outlay required. This is a good choice especially for young people who are unable to afford the higher cost of permanent insurance right now but need maximum life insurance and also want to have the option of converting to permanent coverage in the future.
Permanent Life Insurance
Similar to yearly renewable term and convertible term, whole life policies stretch the cost of insurance out over a longer period of time in order to level out the otherwise increasing cost of insurance. In this case, however, it is spread not over a few years but over your entire life. Your excess premium dollars are invested in the company’s general portfolio. Because you aren’t personally managing that investment, your selection of an insurance company is vitally important.
With this type of policy, however, the inflexibility of premium payments could become a burden if your expenses increase or if you lose your job.
This option offers greater flexibility than whole or term life. After your initial payment, you can reduce or increase the amount of your death benefit (although to increase the amount, you’ll probably have to give the insurance company medical proof that you are still in good health). Also, after your initial payment, you can pay premiums any time, in almost any amount within the policy’s required minimums and maximums.